scholarly journals Optimal Taxation with Private Insurance

2021 ◽  
Author(s):  
Yongsung Chang ◽  
Yena Park
Keyword(s):  
Incomplete Markets ◽  
Optimal Taxation ◽  
Private Insurance ◽  
Borrowing Constraints ◽  
Welfare Effects ◽  
Sufficient Statistics ◽  
Pecuniary Externalities ◽  
Optimal Tax ◽  
Private Market ◽  
Asset Distribution

Abstract We derive a fully nonlinear optimal income tax schedule in the presence of private insurance. We fill the gap in the literature by studying the optimal tax formula with a comprehensive structure of the private markets—including incomplete markets models— both theoretically and quantitatively. As in the standard taxation literature without private insurance (e.g., Saez (2001)), the optimal tax formula can still be expressed in terms of standard sufficient statistics. With private insurance, however, the formula involves additional terms that reflect how the private market interacts with public insurance. For example, the optimal tax formula should also consider asset distribution and pecuniary externalities as well as the welfare effects of borrowing constraints.

scholarly journals Optimal Taxation and Social Insurance with Endogenous Private Insurance

2010 ◽  
Vol 2 (2) ◽  
pp. 85-116 ◽  
Author(s):  
Raj Chetty ◽  
Emmanuel Saez
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Optimal Taxation ◽  
Social Insurance ◽  
Government Intervention ◽  
Private Insurance ◽  
Welfare Gains ◽  
Empirical Estimates ◽  
Fiscal Externalities ◽  
Private Market

We characterize welfare gains from government intervention when the private sector provides partial insurance. We analyze models in which adverse selection, pre-existing information, or imperfect optimization create a role for government intervention. We derive formulas that map existing empirical estimates into quantitative predictions for optimal policy. When private insurance generates moral hazard, standard formulas for optimal government insurance must be modified to account for fiscal externalities. In contrast, standard formulas are unaffected by “informal” private insurance that does not generate moral hazard. Applications to health and unemployment show that formal private market insurance can significantly reduce optimal government benefit rates. (JEL D82, G22, H21, H23, J65)

A Note On The Principle Of Equal Opportunities

2007 ◽  
pp. 128
Author(s):  
Fernando Cabrales ◽  
Ana Fernández ◽  
Fritz Grafe
Keyword(s):  
Empirical Analysis ◽  
Optimal Taxation ◽  
Oecd Countries ◽  
Developing Economy ◽  
Equal Opportunities ◽  
Tax Rate ◽  
Income Differentials ◽  
Optimal Tax ◽  
Equality Of Opportunities ◽  
The Individual

This note presents an empirical analysis of optimal taxation in Chile, adopting Roemer’s equality of opportunities as the evaluation criterion. The equality of opportunities optimal tax rules seek to equalize income differentials arising from factors beyond the control of the individual. Roemer’s theory of equality of opportunities (Roemer, 1998) has been employed to compute the extent to which tax-andtransfer regimes in some OECD countries equalize opportunities among citizens for income acquisition. In this note we apply this approach to Chile, a developing economy, and compare the results to those reported in Roemer, Aaberge, Colombino, Fritzell, Jenkins, Marx, Page, Pommer, Ruiz-Castillo, Segundo, Tranaes, Wagner and Zubiri (2003). We find that the optimal tax rate in Chile according to Roemer’s equalopportunities approach should be zero.

Optimal Redistributional Instruments in Law and Economics

2017 ◽  
Author(s):  
Chris William Sanchirico
Keyword(s):  
Optimal Taxation ◽  
Law And Economics ◽  
Policy Instruments ◽  
Unintended Consequences ◽  
Policy Framework ◽  
Policy Uncertainty ◽  
Conventional Model ◽  
Policy Model ◽  
Optimal Tax ◽  
Adequate Information

This article discusses three strands of the literature on optimal redistributional instruments. The first strand concerns what is sometimes referred to as the ‘tax substitution argument’, which supports the proposition that distributional goals should generally be pursued exclusively through taxes (and subsidies) on labour earnings. The argument rests the controversial assumption that, controlling for labour earnings, all individuals are identical. The second strand, a response to the first, attempts to counter the view that labour earnings exclusivity for redistributional policy is the natural lesson of the economic literature on ‘optimal taxation’. This second subliterature examines the consequences of removing the tax substitution assumption while retaining, arguendo, the optimal tax and policy framework. The third strand of the literature, concerning ‘policy uncertainty’, steps outside the bounds of the conventional model of optimal tax and policy. It first arises as a kind of alternative defence of labour earnings exclusivity in light of the challenge posed by policy eclecticism. Even if the conventional optimal tax and policy model sans tax substitution assumption points toward eclecticism, the defence proceeds, policymakers lack adequate information about the proper direction and scale of distributionally motivated adjustments to other policy instruments. Given the risk of perverse unintended consequences, policymakers should refrain from distributionally motivated tinkering.

Taxation of Couples under Assortative Mating

2014 ◽  
Vol 6 (3) ◽  
pp. 155-177 ◽  
Author(s):  
Alexander Frankel
Keyword(s):  
Assortative Mating ◽  
Optimal Taxation ◽  
Married Couples ◽  
Tax Rates ◽  
Optimal Tax ◽  
Marginal Tax Rates ◽  
Multidimensional Screening

I present a simple and tractable model of the optimal taxation of married couples, working off of the multidimensional screening framework of Armstrong and Rochet (1999). In particular, I study how the tax code varies with the degree of assortative mating. One result is that the “negative jointness” of marginal tax rates found in Kleven, Kreiner, and Saez (2007, 2009) for couples with uncorrelated earnings should be attenuated in the presence of assortative mating. When mating is sufficiently assortative, the optimal tax schedule is separable: an individual's taxes do not depend on his or her spouse's income. (JEL D82, H21, H24, J12)

Feedback Nash equilibria in optimal taxation problems

2009 ◽  
Vol 7 (4) ◽  
Author(s):  
Mikhail Krastanov ◽  
Rossen Rozenov
Keyword(s):  
Continuous Time ◽  
Optimal Taxation ◽  
Public Economics ◽  
Nash Equilibria ◽  
Stackelberg Game ◽  
Necessary Optimality Conditions ◽  
Capital Income ◽  
Optimal Tax ◽  
Feedback Nash Equilibria ◽  
Long Run

AbstractA well-known result in public economics is that capital income should not be taxed in the long run. This result has been derived using necessary optimality conditions for an appropriate dynamic Stackelberg game. In this paper we consider three models of dynamic taxation in continuous time and suggest a method for calculating their feedback Nash equilibria based on a sufficient condition for optimality. We show that the optimal tax on capital income is generally different from zero.

Sign in / Sign up

Export Citation Format

Share Document