Redistributive Taxation in a Partial-Insurance Economy

Kjetil Storesletten, Giovanni L. Violante and Jonathan Heathcote
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Giovanni L. Violante: New York University

No 1124, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: We conduct a welfare analysis of redistributive labor taxation in a tractable heterogeneous-agents economy. We highlight four key considerations that determine the optimal overall progressivity of the tax schedule: (i) the preference weight on public consumption goods, (ii) the variance of idiosyncratic risk, (iii) the fraction of idiosyncratic risk that can be insured privately, and (iv) the elasticity of labor supply.

Date: 2010
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Related works:
Working Paper: Redistributive Taxation in a Partial Insurance Economy (2012)
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