Optimal Taxation and Life Cycle Labor Supply Profile
The optimal capital income tax rate is 36 percent as reported by Conesa, Kitao, and Krueger (2009). This result is mainly driven by the market incompleteness as well as the endogenous labor supply in a life-cycle framework. We show that this model fails to account for the basic life-cycle features of the labor supply observed in the U.S. data. In this paper, we introduce into this model non-linear wages and inter-vivos transfers into this model in order to account for the life-cycle features of labor supply. The former makes hours of work highly persistent and helps to account for labor choices at the extensive margin over the life cycle. The latter allows us to account for labor choices early in life. The suggested model delivers an optimal capital income tax rate of 7.4 percent, which is significantly lower than what Conesa, Kitao, and Krueger (2009) found.
|Date of creation:||Dec 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 427-6250 ext. 3841
Web page: http://www.bcrp.gob.pe
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard Rogerson, 2010.
"Indivisible Labor, Lotteries and Equilibrium,"
Levine's Working Paper Archive
250, David K. Levine.
- W. G. Gale & J. K. Scholz, .
"Intergenerational transfers and the accumulation of wealth,"
Institute for Research on Poverty Discussion Papers
1019-93, University of Wisconsin Institute for Research on Poverty.
- William G. Gale & John Karl Scholz, 1994. "Intergenerational Transfers and the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 145-160, Fall.
- William G. Gale & John Karl Scholz, 1991. "Intergenerational Transfers and the Accumulation of Wealth," UCLA Economics Working Papers 624, UCLA Department of Economics.
- Juan Carlos Conesa & Sagiri Kitao & Dirk Krueger, 2007.
"Taxing Capital? Not a Bad Idea After All!,"
NBER Working Papers
12880, National Bureau of Economic Research, Inc.
- Conesa, Juan Carlos & Kitao, Sagiri & Krueger, Dirk, 2006. "Taxing Capital? Not a Bad Idea After All!," CEPR Discussion Papers 5929, C.E.P.R. Discussion Papers.
- Conesa, Juan Carlos & Kitao, Sagiri & Krueger, Dirk, 2006. "Taxing capital? Not a bad idea after all!," CFS Working Paper Series 2006/21, Center for Financial Studies (CFS).
- Juan C. Conesa & Dirk Krueger, 2004. "Taxing Capital: Not a Bad Idea After All," 2004 Meeting Papers 403, Society for Economic Dynamics.
- Victoria Osuna Padilla & José-Víctor Ríos-Rull, 2002.
"Implementing the 35 Hour Workweek by Means of Overtime Taxation,"
Economic Working Papers at Centro de Estudios Andaluces
E2002/04, Centro de Estudios Andaluces.
- Victoria Osuna & Jose-Victor Rios-Rull, 2003. "Implementing the 35 Hour Workweek by Means of Overtime Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 179-206, January.
- Judd, Kenneth L., 1985.
"Redistributive taxation in a simple perfect foresight model,"
Journal of Public Economics,
Elsevier, vol. 28(1), pages 59-83, October.
- Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Erosa, Andres & Gervais, Martin, 2002.
"Optimal Taxation in Life-Cycle Economies,"
Journal of Economic Theory,
Elsevier, vol. 105(2), pages 338-369, August.
- Andres Erosa & Martin Gervais, 2000. "Optimal taxation in life-cycle economies," Working Paper 00-02, Federal Reserve Bank of Richmond.
- Andrés Erosa & Martin Gervais, 1998. "Optimal Taxation in Life-Cycle Economies," UWO Department of Economics Working Papers 9812, University of Western Ontario, Department of Economics.
- Adolfo Figueroa, 1995. "Desigualdad y Democracia," Capítulos de Libros PUCP / Chapters of PUCP books, in: Gonzalo Portocarrero & Marcel Valcárcel (ed.), El Perú frente al siglo XXI, edition 1, chapter 3, pages 48-71 Departamento de Economía - Pontificia Universidad Católica del Perú.
- Kjetil Storesletten & Chris Telmer & Amir Yaron, 1997.
"Consumption and risk sharing over the life cycle,"
GSIA Working Papers
228, Carnegie Mellon University, Tepper School of Business.
- Kjetil Storesletten & Chris I. Telmer & Amir Yaron, 2000. "Consumption and Risk Sharing Over the Life Cycle," NBER Working Papers 7995, National Bureau of Economic Research, Inc.
- Storesletten, Kjetil & Telmer, Chris & Yaron, Amir, 2002. "Consumption and Risk Sharing Over the Life Cycle," Seminar Papers 702, Stockholm University, Institute for International Economic Studies.
- Nikita Céspedes Reynaga & Silvio Rendon, 2012.
"The Frisch Elasticity in Labor Markets with high Job Turnover,"
Department of Economics Working Papers
12-13, Stony Brook University, Department of Economics.
- Céspedes Reynaga, Nikita & Rendon, Silvio, 2012. "The Frisch Elasticity in Labor Markets with High Job Turnover," IZA Discussion Papers 6991, Institute for the Study of Labor (IZA).
- Daniel Aaronson & Eric French, 2004.
"The Effect of Part-Time Work on Wages: Evidence from the Social Security Rules,"
Journal of Labor Economics,
University of Chicago Press, vol. 22(2), pages 329-352, April.
- Daniel Aaronson & Eric French, 2001. "The effect of part-time work on wages: evidence from the Social Security rules," Working Paper Series WP-01-20, Federal Reserve Bank of Chicago.
- Gary Hansen, 2010.
"Indivisible Labor and the Business Cycle,"
Levine's Working Paper Archive
233, David K. Levine.
- Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, 1996.
"The Effects of Income and Wealth on Time and Money Transfers between Parents and Children,"
NBER Working Papers
5522, National Bureau of Economic Research, Inc.
- Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, . "The Effects of Income and Wealth on Time and MOney Transfers Between Parents and Children," IPR working papers 96-5, Institute for Policy Resarch at Northwestern University.
- Gouveia, Miguel & Strauss, Robert P., 1994. "Effective Federal Individual Tax Functions: An Exploratory Empirical Analysis," National Tax Journal, National Tax Association, vol. 47(2), pages 317-39, June.
- Waldo Mendoza Bellido, 2013. "Contexto internacional y desempeño macroeconómico en América Latina y el Perú: 1980-2012," Documentos de Trabajo / Working Papers 2013-351, Departamento de Economía - Pontificia Universidad Católica del Perú.
When requesting a correction, please mention this item's handle: RePEc:rbp:wpaper:2013-020. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Research Unit)The email address of this maintainer does not seem to be valid anymore. Please ask Research Unit to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.