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Optimal Redistribution with Intensive and Extensive Labor Supply Margins: A Life-Cycle Perspective

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  • Jean-Baptiste Michau

    (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)

Abstract

While the participation decision is discrete in a static context, i.e. to work or not to work, such is not the case in a life-cycle context where workers choose the fraction of their lifetime that they spend working. In this paper, I therefore characterize the optimal redistribution policy in a life-cycle framework with both an intensive and an extensive margin of labor supply. The government should optimally design a history-dependent social security system which induces higher productivity individuals to retire later. Some redistribution therefore needs to be done through the pension system; a standard non-linear income tax is not enough.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00639121.

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Date of creation: 08 Nov 2011
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Handle: RePEc:hal:wpaper:hal-00639121

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Related research

Keywords: Extensive margin; Optimal redistribution; Retirement age; Social security;

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References

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  8. Paul Beaudry & Charles Blackorby & Dezs� Szalay, 2009. "Taxes and Employment Subsidies in Optimal Redistribution Programs," American Economic Review, American Economic Association, vol. 99(1), pages 216-42, March.
  9. Maxim Troshkin & Aleh Tsyvinski & Mikhail Golosov, 2010. "Optimal Dynamic Taxes," 2010 Meeting Papers 320, Society for Economic Dynamics.
  10. Richard Blundell & Andrew Shephard, 2012. "Employment, Hours of Work and the Optimal Taxation of Low-Income Families," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 481-510.
  11. Andres Erosa & Martin Gervais, 2000. "Optimal taxation in life-cycle economies," Working Paper 00-02, Federal Reserve Bank of Richmond.
  12. Peter A. Diamond, 2003. "Taxation, Incomplete Markets, and Social Security," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262042134, December.
  13. Gorry, Aspen & Oberfield, Ezra, 2010. "Optimal Taxation over the Life Cycle," MPRA Paper 25297, University Library of Munich, Germany.
  14. Raj Chetty & Adam Guren & Day Manoli & Andrea Weber, 2013. "Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 1 - 56.
  15. Marek Kapicka, 2006. "Optimal Income Taxation with Human Capital Accumulation and Limited Record Keeping," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(4), pages 612-639, October.
  16. Mikhail Golosov & Aleh Tsyvinski, 2006. "Designing Optimal Disability Insurance: A Case for Asset Testing," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 257-279, April.
  17. Narayana Kocherlakota & Borys Grochulski, 2007. "Nonseparable Preferences and Optimal Social Security systems," Working Papers 2007-1, University of Minnesota, Department of Economics, revised 14 Aug 2007.
  18. Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, number 9780195311303.
  19. Oliver Denk & Jean-Baptiste Michau, 2013. "Optimal Social Security with Imperfect Tagging," Working Papers hal-00796521, HAL.
  20. Zvi Eckstein & Éva Nagypál, 2004. "The evolution of U.S. earnings inequality: 1961?2002," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Dec, pages 10-29.
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Cited by:
  1. Marios Karabarbounis, 2012. "Heterogeneity in Labor Supply Elasticity and Optimal Taxation," 2012 Meeting Papers 655, Society for Economic Dynamics.
  2. Oliver Denk & Jean-Baptiste Michau, 2013. "Optimal Social Security with Imperfect Tagging," Working Papers hal-00796521, HAL.

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