Optimal Taxation with Private Insurance

Yongsung Chang and Yena Park
Additional contact information
Yena Park: University of Rochester

No 2017rwp-105, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: We derive a fully nonlinear optimal income tax schedule in the presence of a private insurance market. The optimal tax formula is expressed in terms of sufficient statistics?such as the Frisch elasticity of labor supply, social preferences, and hazard rates of the income distributions?as in the standard Mirrleesian taxation without private insurance (e.g., Saez (2001)). However, in the presence of a private market, the standard sufficient statistics are no longer sufficient. The optimal tax rate also depends on how private savings interact with public insurance? through substitution and crowding in/out. Based on our formula, we compute the optimal tax schedule using a quantitative general equilibrium model calibrated to reproduce the U.S. income distribution.

Keywords: Optimal Taxation; Private Insurance; Crowding Out; Mirrelsian Tax (search for similar items in EconPapers)
JEL-codes: D51 H21 H23 (search for similar items in EconPapers)
Pages: 38pages
Date: 2017-08
New Economics Papers: this item is included in nep-dge, nep-ias, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Optimal Taxation with Private Insurance (2021)
Working Paper: Optimal Taxation with Private Insurance (2018)
Working Paper: Optimal Taxation with Private Insurance (2017)
Working Paper: Optimal Taxation with Private Insurance (2017)
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