IDEAS home Printed from https://ideas.repec.org/p/red/sed013/788.html
   My bibliography  Save this paper

Taxes, Wedges and Aggregate Uncertainty: A Mirrleesian Approach

Author

Listed:
  • Carlos da Costa

    (Fundação Getulio Vargas)

Abstract

We study optimal taxation in a dynamic Mirrlees' incentive structure where both aggregate and idiosyncratic risks are present. When aggregate shocks are i.i.d., we characterize the steady-state of our economy and prove the existence of an invariant distribution of expected utilities, which is non-degenerate thanks to the perpetual youth we assume. We show that consumption and income shares of each cohort are invariant to the aggregate state. In contrast, when aggregate shocks are persistent, efficient allocations display history dependence, and no invariant distribution needs to exist. We provide a particular example in which it does not exist and one in which it does. In the latter case, the particular distribution at which a society settles depends on the whole history of aggregate shocks.

Suggested Citation

  • Carlos da Costa, 2013. "Taxes, Wedges and Aggregate Uncertainty: A Mirrleesian Approach," 2013 Meeting Papers 788, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:788
    as

    Download full text from publisher

    File URL: https://economicdynamics.org/meetpapers/2013/paper_788.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. S. Rao Aiyagari & Albert Marcet & Thomas J. Sargent & Juha Seppala, 2002. "Optimal Taxation without State-Contingent Debt," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1220-1254, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed013:788. 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: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.