Equalizing Outcomes and Equalizing Opportunities: Optimal Taxation when Children's Abilities Depend on Parents' Resources
AbstractEmpirical 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 one and three-quarters percent of consumption in our baseline case.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18332.
Date of creation: Aug 2012
Date of revision:
Note: CH PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- To achieve the American Dream, you need more redistribution
by Economic Logician in Economic Logic on 2012-09-18 14:03:00
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.