Equalizing outcomes and equalizing opportunities
Subtitle: optimal taxation when children's abilities depend on parents' resources
By: Alexander Gelber, Matthew Weinzierl
Contributors: Weinzierl, Matthew; Harvard Business School
Series: Working paper / Harvard Business School -- 13-014; Working paper (Harvard Business School) -- 13-014
Publisher: Harvard Business School
Published: 2013
Place of publication: Boston]
Language: eng
Number of pages: 64
Subjects: Children; Economic aspects; Econometric models; Taxation; Social aspects; Income distribution
Work titles: Equalizing outcomes vs. equalizing opportunities
Description: Empirical research suggests that parents' economic resources affect their children's future earnings abilities. Optimal tax policy therefore treats future ability distributions as endogenous to current taxes. We model this endogeneity, calibrate the model to match estimates of the intergenerational transmission of earnings ability in the United States, and use the model to simulate such an optimal policy numerically. The optimal policy in this context is more redistributive toward low-income parents than existing U.S. tax policy. It also increases the probability that low-income children move up the economic ladder, generating a present-value welfare gain of more than two and one half percent of consumption in our baseline case.
Notes: "August 2012. (Updated July, 2013.)" -- Publisher's website.

Revision of Equalizing outcomes vs. equalizing opportunities: optimal taxation when children's abilities depend on parents' resources.

Includes bibliographical references (pages 46-48).