Optimal Taxation with Private Insurance

Yena Park () and Yongsung Chang

Working Paper Series from Institute of Economic Research, Seoul National University

Abstract: We derive a fully nonlinear optimal income tax schedule in the presence of private insurance. As in the standard taxation literature without private insurance (e.g., Saez (2001)), the optimal tax formula can still be expressed in terms of sufficient statistics. With private insurance, however, the formula involves additional terms that reflect how the private market interacts with public insurance. For example, in our benchmark model-Huggett (1993)-the optimal tax formula should also consider pecuniary externalities as well as changes in the asset holdings of households. According to our analysis, the difference in optimal tax rates (with and without a private insurance market) can be as large as 11 percentage points.

Keywords: Optimal Taxation; Private Insurance; Pecuniary Externalities; Variational Approach (search for similar items in EconPapers)
JEL-codes: D52 E62 H21 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-dge, nep-ias, nep-mac, nep-ore and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ier.snu.ac.kr/activity/working-papers?md=download&seqidx=17

Related works:
Journal Article: Optimal Taxation with Private Insurance (2021)
Working Paper: Optimal Taxation with Private Insurance (2017)
Working Paper: Optimal Taxation with Private Insurance (2017)
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:snu:ioerwp:no117

Access Statistics for this paper

More papers in Working Paper Series from Institute of Economic Research, Seoul National University Contact information at EDIRC.
Bibliographic data for series maintained by Hojung Lee ().