A Road Map for Efficiently Taxing Heterogeneous Agents

Marios Karabarbounis

American Economic Journal: Macroeconomics, 2016, vol. 8, issue 2, 182-214

Abstract: This paper characterizes optimal labor income taxes that depend on age, household assets, and filing status (one or two earners) within a life-cycle model with heterogeneous, two-member households. The key innovation is a labor supply elasticity that varies endogenously among households. I find that tax distortions should be hump shaped in age, decrease in household assets, and be lower for joint relative to single filers. Age and assets act as complements within the optimal tax policy. Overall, a tax system using all three tags can increase consumption up to 6.4 percent and welfare up to 1.5 percent. (JEL D14, D91, H21, H24, J22, J31)

JEL-codes: D14 D91 H21 H24 J22 J31 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/mac.20140274
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/mac.20140274 (application/pdf)
https://www.aeaweb.org/aej/mac/data/0802/2014-0274_data.zip (application/zip)
https://www.aeaweb.org/aej/mac/app/0802/2014-0274_app.pdf (application/pdf)
https://www.aeaweb.org/aej/mac/ds/0802/2014-0274_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
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: https://EconPapers.repec.org/RePEc:aea:aejmac:v:8:y:2016:i:2:p:182-214

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

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 ().