Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk
Title | Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk PDF eBook |
Author | Dirk Krueger |
Publisher | |
Pages | 0 |
Release | 2018 |
Genre | Income tax |
ISBN |
We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium feedback of private precautionary saving. For logarithmic utility our full analytical solution of the Ramsey problem shows that the optimal aggregate saving rate is independent of income risk. The optimal time-invariant tax on capital is increasing in income risk. Its sign depends on the extent of risk and on the Pareto weight of future generations. If the Ramsey tax rate that maximizes steady state utility is positive, then implementing this tax rate permanently generates a Pareto-improving transition even if the initial equilibrium is dynamically efficient. We generalize our results to Epstein-Zin-Weil utility and show that the optimal steady state saving rate is increasing in income risk if and only if the intertemporal elasticity of substitution is smaller than 1.
Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk
Title | Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk PDF eBook |
Author | Dirk Krueger |
Publisher | |
Pages | 78 |
Release | 2018 |
Genre | Income tax |
ISBN |
We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium feedback of private precautionary saving. For logarithmic utility our full analytical solution of the Ramsey problem shows that the optimal aggregate saving rate is independent of income risk. The optimal time-invariant tax on capital is increasing in income risk. Its sign depends on the extent of risk and on the Pareto weight of future generations. If the Ramsey tax rate that maximizes steady state utility is positive, then implementing this tax rate permanently generates a Pareto-improving transition even if the initial equilibrium is dynamically efficient. We generalize our results to Epstein-Zin-Weil utility and show that the optimal steady state saving rate is increasing in income risk if and only if the intertemporal elasticity of substitution is smaller than 1.
Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk
Title | Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk PDF eBook |
Author | Dirk Krueger |
Publisher | |
Pages | 0 |
Release | 2018 |
Genre | |
ISBN |
We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium feedback of private precautionary saving. For logarithmic utility our full analytical solution of the Ramsey problem shows that the optimal aggregate saving rate is independent of income risk. The optimal time-invariant tax on capital is increasing in income risk. Its sign depends on the extent of risk and on the Pareto weight of future generations. If the Ramsey tax rate that maximizes steady state utility is positive, then implementing this tax rate permanently generates a Pareto-improving transition even if the initial equilibrium is dynamically efficient. We generalize our results to Epstein-Zin-Weil utility and show that the optimal steady state saving rate is increasing in income risk if and only if the intertemporal elasticity of substitution is smaller than 1.
Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncractic Income Risk
Title | Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncractic Income Risk PDF eBook |
Author | Dirk Krueger |
Publisher | |
Pages | |
Release | 2018 |
Genre | |
ISBN |
Optimal Capital Taxation with Idiosyncratic Investment Risk
Title | Optimal Capital Taxation with Idiosyncratic Investment Risk PDF eBook |
Author | Vasia Panousi |
Publisher | |
Pages | |
Release | 2012 |
Genre | |
ISBN |
Capital Taxation with Entrepreneurial Risk
Title | Capital Taxation with Entrepreneurial Risk PDF eBook |
Author | Vasia Panousi |
Publisher | DIANE Publishing |
Pages | 50 |
Release | 2010 |
Genre | |
ISBN | 1437980228 |
Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk (Optimale Kapitalsteuern im OLG-Modell mit nicht versicherbarem idiosynkratischen Einkommensrisiko).
Title | Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk (Optimale Kapitalsteuern im OLG-Modell mit nicht versicherbarem idiosynkratischen Einkommensrisiko). PDF eBook |
Author | Dirk Krueger |
Publisher | |
Pages | 96 |
Release | 2019 |
Genre | |
ISBN |
English Abstract: We char ...