Optimal dynamic taxes
By: Mikhail Golosov, Maxim Troshkin, Aleh Tsyvinski
Contributors: Troshkin, Maxim; Tsyvinski, Aleh; National Bureau of Economic Research
Series: NBER working paper series -- working paper 17642; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17642.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We study optimal labor and savings distortions in a lifecycle model with idiosyncratic shocks.  We show a tight connection between its recursive formulation and a static Mirrlees model with two goods, which allows us to derive elasticity-based expressions for the dynamic optimal distortions.  We derive a generalization of a savings distortion for non-separable preferences and show that, under certain conditions, the labor wedge tends to zero for sufficiently high skills.  We estimate skill distributions using individual data on the U.S.  taxes and labor incomes.  Computed optimal distortions decrease for sufficiently high incomes and increase with age"--National Bureau of Economic Research web site.
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