Evidence on the Insurance Effect of Redistributive Taxation

Christos Koulovatianos, Charles Grant, Alexander Michaelides and Mario Padula

Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: If households face uninsurable idiosyncratic earnings risk, theory predicts that re- distributive tax and transfer systems have both an insurance and a distortionary effect. Exploiting the substantial variation of tax and transfer systems across US states and over time we investigate the necessary traces of these two effects in the data: that state-level measures of redistributive taxation should correlate negatively with, (a) the standard deviation, and (b) the mean, of the within-state consumption distribution. We find that the first correlation is robust, supporting strongly the presence of an insurance effect. The distortionary effect can also be detected in the data but it is less precisely estimated.

Keywords: Undiversifiable Earnings Risk; Consumption Insurance; Tax Distortions. (search for similar items in EconPapers)
Date: 2009-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.nottingham.ac.uk/cfcm/documents/papers/09-08.pdf (application/pdf)

Related works:
Journal Article: Evidence on the Insurance Effect of Redistributive Taxation (2010)
Working Paper: Evidence on the Insurance Effect of Redistributive Taxation (2008)
Working Paper: Evidence on the Insurance Effect of Redistributive Taxation (2006)
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:not:notcfc:09/08

Access Statistics for this paper

More papers in Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Hilary Hughes ().