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

  • Jean-Baptiste Michau

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS)

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.

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Date of creation: 08 Nov 2011
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Handle: RePEc:hal:wpaper:hal-00639121
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  8. Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059, June.
  9. Erosa, Andres & Gervais, Martin, 2002. "Optimal Taxation in Life-Cycle Economies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 338-369, August.
  10. Eytan Sheshinski, 2002. "Optimum Delayed Retirement Credit," Discussion Paper Series dp329, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
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  12. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2009. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967-2006," NBER Working Papers 15483, National Bureau of Economic Research, Inc.
  13. Mikhail Golosov & Aleh Tsyvinski, 2006. "Designing Optimal Disability Insurance: A Case for Asset Testing," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 257-279, April.
  14. Beaudry, Paul & Blackorby, Charles, 2004. "Taxes And Employment Subsidies In Optimal Redistribution Programs," The Warwick Economics Research Paper Series (TWERPS) 708, University of Warwick, Department of Economics.
  15. Mikhail Golosov & Maxim Troshkin & Aleh Tsyvinski, 2011. "Optimal Dynamic Taxes," NBER Working Papers 17642, National Bureau of Economic Research, Inc.
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  17. Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, number 9780195311303, June.
  18. Richard Rogerson & Johanna Wallenius, 2007. "Micro and Macro Elasticities in a Life Cycle Model With Taxes," NBER Working Papers 13017, National Bureau of Economic Research, Inc.
  19. Peter A. Diamond, 2005. "Taxation, Incomplete Markets, and Social Security," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262541823.
  20. Oliver Denk & Jean-Baptiste Michau, 2013. "Optimal Social Security with Imperfect Tagging," Working Papers hal-00796521, HAL.
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