Consumption Insurance, Welfare, and Optimal Progressive Taxation

Davud Rostam-Afschar and Jiaxiong Yao

VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking from Verein für Socialpolitik / German Economic Association

Abstract: Partial insurance of consumption against wage shocks is achieved through progressive taxation, labor supply adjustment, and precautionary wealth accumulation. The optimal degree of progressivity depends on preference and initial wealth conditions. More patient, more willing to work, and less wealthy households prefer more progressivity. The optimal progressivity is similar in Germany in comparison to the United States, though wealth has a greater impact on consumption insurance in Germany.

JEL-codes: D31 E21 H21 J22 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ias, nep-mac and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc17:168179

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