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Marginal tax rates and income inequality: a quantitative-theoretic analysis

  • David Altig
  • Charles T. Carlstrom

An Auerbach-Kotlikoff (AK) overlapping-generations model is used to examine how changes in marginal income-tax rate structures affect the distribution of income, drawing on actual changes to the U.S. tax code. This approach builds on AK by allowing for many different cohort types, and hence for a nontrivial endogenous distribution of income.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9508.

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Date of creation: 1995
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Handle: RePEc:fip:fedcwp:9508
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  1. Daniel Feenberg & James Poterba, 1992. "Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns," NBER Working Papers 4229, National Bureau of Economic Research, Inc.
  2. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872 Elsevier.
  3. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
  4. Davies, James B & St-Hilaire, France & Whalley, John, 1984. "Some Calculations of Lifetime Tax Incidence," American Economic Review, American Economic Association, vol. 74(4), pages 633-49, September.
  5. Benveniste, L M & Scheinkman, J A, 1979. "On the Differentiability of the Value Function in Dynamic Models of Economics," Econometrica, Econometric Society, vol. 47(3), pages 727-32, May.
  6. Blackburn, McKinley L., 1989. "Interpreting the magnitude of changes in measures of income inequality," Journal of Econometrics, Elsevier, vol. 42(1), pages 21-25, September.
  7. Martin S. Eichenbaum & Lars Peter Hansen, 1987. "Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data," NBER Working Papers 2181, National Bureau of Economic Research, Inc.
  8. Lawrence B. Lindsey, 1981. "Is the Maximum Tax on Earned Income Effective?," NBER Working Papers 0613, National Bureau of Economic Research, Inc.
  9. Rebecca M. Blank & Alan S. Blinder, 1985. "Macroeconomics, Income Distribution, and Poverty," NBER Working Papers 1567, National Bureau of Economic Research, Inc.
  10. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  11. Fullerton, Don & Rogers, Diane Lim, 1991. "Lifetime Versus Annual Perspectives on Tax Incidence," National Tax Journal, National Tax Association, vol. 44(3), pages 277-87, September.
  12. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September.
  13. Paul Beaudry & Eric van Wincoop, 1992. "Alternative specifications for consumption and the estimation of the intertemporal elasticity of substitution," Discussion Paper / Institute for Empirical Macroeconomics 69, Federal Reserve Bank of Minneapolis.
  14. Gastwirth, Joseph L, 1972. "The Estimation of the Lorenz Curve and Gini Index," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 306-16, August.
  15. Rogerson, Richard & Rupert, Peter, 1991. "New estimates of intertemporal substitution : The effect of corner solutions for year-round workers," Journal of Monetary Economics, Elsevier, vol. 27(2), pages 255-269, April.
  16. Killingsworth, Mark R. & Heckman, James J., 1987. "Female labor supply: A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 2, pages 103-204 Elsevier.
  17. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
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