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

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  • Jean-Baptiste Michau

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

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.

Suggested Citation

  • Jean-Baptiste Michau, 2011. "Optimal Redistribution with Intensive and Extensive Labor Supply Margins: A Life-Cycle Perspective," Working Papers hal-00639121, HAL.
    • Handle: RePEc:hal:wpaper:hal-00639121
    Note: View the original document on HAL open archive server: https://hal.science/hal-00639121
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    References listed on IDEAS

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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, 2018. "Optimal Social Security with Imperfect Tagging," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(3), pages 717-762, July.

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    Keywords

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