Economics at your fingertips  

Optimal Mirrleesean Taxation in a Ben-Porath Economy

Marek Kapicka

American Economic Journal: Macroeconomics, 2015, vol. 7, issue 2, 219-48

Abstract: I characterize optimal taxes in a life-cycle economy where ability and human capital are unobservable. I show that unobservable human capital effectively makes preferences over labor nonseparable across age. I generalize the static optimal tax formulas to account for such nonseparabilities and show how they depend both on own-Frisch labor elasticities and cross-Frisch labor elasticities. I calibrate the economy to US data. I find that the optimal marginal income taxes decrease with age, in contrast to both the US tax code and to a model with observable human capital. I demonstrate that the behavior of cross Frisch elasticities is essential in explaining the decline. (JEL D91, H21, H24, J24)

JEL-codes: D91 H21 H24 J24 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/mac.20110110
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link) (application/pdf) (application/zip) (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: The Dynamics of Optimal Taxation when Human Capital is Endogenous (2006) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

Page updated 2020-09-07
Handle: RePEc:aea:aejmac:v:7:y:2015:i:2:p:219-48