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Optimal taxation and debt with uninsurable risks to human capital accumulation

Piero Gottardi (), Atsushi Kajii and Tomoyuki Nakajima ()

No 897, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: We consider an economy where individuals face uninsurable risks to their human capital accumulation, and analyze the optimal level of linear taxes on capital and labor income together with the optimal path of government debt. We show that in the presence of such risks it is beneficial to tax both labor and capital and to issue public debt. We also assess the quantitative importance of these findings, and show that the benefits of goverment debt and capital taxes both increase with the magnitude of idiosyncratic risks and the degree of relative risk aversion.

Keywords: incomplete markets; Ramsey equilibrium; optimal taxation; optimal public debt. (search for similar items in EconPapers)
JEL-codes: D52 D60 D90 E20 E62 H21 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-hrm, nep-mac, nep-pbe and nep-pub
Date: 2014-06
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Related works:
Journal Article: Optimal Taxation and Debt with Uninsurable Risks to Human Capital Accumulation (2015) Downloads
Working Paper: Optimal taxation and debt with uninsurable risks to human capital accumulation (2015) Downloads
Working Paper: Optimal taxation and debt with uninsurable risks to human capital accumulation (2014) Downloads
Working Paper: Optimal taxation and debt with uninsurable risks to human capital accumulation (2014) Downloads
Working Paper: Optimal taxation and debt with uninsurable risks to human capital accumulation (2014) Downloads
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