Income Inequality and Asset Prices under Redistributive Taxation
Lubos Pastor () and
No 21668, NBER Working Papers from National Bureau of Economic Research, Inc
Our simple model features agents heterogeneous in skill and risk aversion, incomplete financial markets, and redistributive taxation. In equilibrium, agents become entrepreneurs if their skill is sufficiently high or risk aversion sufficiently low. Under heavier taxation, entrepreneurs are more skilled and less risk-averse, on average. Through these selection effects, the tax rate is positively related to aggregate productivity and negatively related to the equity risk premium. Both income inequality and stock prices initially increase but eventually decrease with the tax rate. Investment risk, stock market participation, and skill heterogeneity all contribute to inequality. Cross-country empirical evidence supports the model’s predictions.
JEL-codes: E24 G1 H2 J24 J31 J38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ent, nep-ifn, nep-mac and nep-pbe
Note: AP LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Published as Pástor, Lˇuboš & Veronesi, Pietro, 2016. "Income inequality and asset prices under redistributive taxation," Journal of Monetary Economics, Elsevier, vol. 81(C), pages 1-20.
Downloads: (external link)
Journal Article: Income inequality and asset prices under redistributive taxation (2016)
Working Paper: Income Inequality and Asset Prices under Redistributive Taxation (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:21668
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().