The Effectiveness of Consumption Taxes and Transfers as Insurance against Idiosyncratic Risk
Tomoyuki Nakajima () and
No 74, UTokyo Price Project Working Paper Series from University of Tokyo, Graduate School of Economics
We quantitatively evaluate the effectiveness of a consumption tax and transfer pro- gram as insurance against idiosyncratic earnings risk. Our framework is a heterogeneous- agent, incomplete-market model with idiosyncratic wage risk and indivisible labor. The model is calibrated to the U.S. economy. We find a weak insurance effect of the transfer program. Extending the transfer system from the current scale raises consumption un- certainty, which increases aggregate savings and reduces the interest rate. Furthermore, consumption inequality shows a small decrease.
Keywords: Consumption taxes; Transfers; Risk sharing; Consumption inequality; Indivisible labor; Incomplete markets (search for similar items in EconPapers)
JEL-codes: E62 D31 J22 C68 (search for similar items in EconPapers)
Pages: 44 pages
New Economics Papers: this item is included in nep-dge, nep-ias, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Journal Article: The Effectiveness of Consumption Taxes and Transfers as Insurance Against Idiosyncratic Risk (2020)
Working Paper: The Effectiveness of Consumption Taxes and Transfers as Insurance against Idiosyncratic Risk (2016)
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:upd:utppwp:074
Access Statistics for this paper
More papers in UTokyo Price Project Working Paper Series from University of Tokyo, Graduate School of Economics University of Tokyo 702 Faculty of Economics, The University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo, 113-0033, Japan. Contact information at EDIRC.
Bibliographic data for series maintained by Yayoi Hatano ().