Nonseparable preferences and optimal social security systems
By: Borys Grochulski, Narayana Kocherlakota
Contributors: Kocherlakota, Narayana Rao; National Bureau of Economic Research
Series: NBER working paper series -- working paper 13362; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13362.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "In this paper, we consider economies in which agents are privately informed about their skills, which are evolving stochastically over time.  We require agents' preferences to be weakly separable between the lifetime paths of consumption and labor.  However, we allow for intertemporal nonseparabilities in preferences like habit formation.  We show that such nonseparabilities imply that optimal asset income taxes are necessarily retrospective in nature.  We show that under weak conditions, it is possible to implement a socially optimal allocation using a social security system in which taxes on wealth are linear, and taxes/transfers are history-dependent only at retirement.  The average asset income tax in this system is zero"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 9/10/2007.

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