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Optimal taxation with gradual learning of types

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  • Costa, Carlos Eugênio da

Abstract

An important feature of life-cycle models is the presence of uncertainty regarding one’s labor income. Yet this issue, long recognized in different areas, has not received enough attention in the optimal taxation literature. This paper is an attempt to fill this gap. We write a simple 3 period model where agents gradually learn their productivities. In a framework akin to Mirrlees’ (1971) static one, we derive properties of optimal tax schedules and show that: i) if preferences are (weakly) separable, uniform taxation of goods is optimal, ii) if they are (strongly) separable capital income is to rate than others forms of investiment.

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  • Costa, Carlos Eugênio da, 2003. "Optimal taxation with gradual learning of types," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 499, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  • Handle: RePEc:fgv:epgewp:499
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    Cited by:

    1. M. Ali Khan & Tapan Mitra, 2005. "On choice of technique in the Robinson-Solow-Srinivasan model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 1(2), pages 83-110.

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