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Efficient taxation with differential risks of dependence and mortality

Author

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  • Nishimura, Y.

    (Osaka University)

  • Pestieau, P.

    (Université catholique de Louvain, CORE, Belgium)

Abstract

The purpose of this note is to analyze the optimal tax and transfer policies that should be conducted in a society where individuals differ according to their productivity and their risk of mortality and dependency. We show that according to the most reasonable estimates of correlation among these three characteristics, an optimal policy should consist of a tax on earning and second period consumption and of a subsidy on long term care spending. The sign of the tax on saving is ambiguous but we can expect a positive tax on saving in reasonable cases.

Suggested Citation

  • Nishimura, Y. & Pestieau, P., 2015. "Efficient taxation with differential risks of dependence and mortality," LIDAM Discussion Papers CORE 2015018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2015018
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2015.html
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    References listed on IDEAS

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    1. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411, January.
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    3. Helmuth Cremer & Jean‐Marie Lozachmeur & Pierre Pestieau, 2010. "Collective Annuities and Redistribution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 23-41, February.
    4. Peter Diamond & Johannes Spinnewijn, 2011. "Capital Income Taxes with Heterogeneous Discount Rates," American Economic Journal: Economic Policy, American Economic Association, vol. 3(4), pages 52-76, November.
    5. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
    6. Hindriks, Jean & Myles, Gareth D., 2013. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262018691, December.
    7. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    8. Fleurbaey, Marc & Maniquet, François, 2015. "Optimal taxation theory and principles of fairness," LIDAM Discussion Papers CORE 2015005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. NESTEROV, Yurii, 2015. "Complexity bounds for primal-dual methods minimizing the model of objective function," LIDAM Discussion Papers CORE 2015003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Marie‐Louise Leroux & Pierre Pestieau, 2022. "Age‐related taxation of bequests in the presence of a dependency risk," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(1), pages 92-119, February.
    2. Marie‐Louise Leroux & Pierre Pestieau, 2023. "Age‐ and health‐related non‐linear inheritance taxation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(3), pages 897-912, August.
    3. Yukihiro Nishimura & Pierre Pestieau, 2022. "Old age or dependence: Which social insurance?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(4), pages 639-652, August.

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    More about this item

    Keywords

    long term care; mortality risk; efficient taxation;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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