Optimal taxation in a habit formation economy

• 成果类型: Article
• 署名作者: Koehne, Sebastian; Kuhn, Moritz
• 署名单位: Stockholm University; Leibniz Association; Ifo Institut; University of Bonn; IZA Institute Labor Economics
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2014.12.007
• 发表日期: 2015
• 页码: 31-39
• 关键词: Optimal taxation; habit formation; Recursive contracts

摘要

This paper studies habit formation in consumption preferences in a dynamic Mirrlees economy. We derive optimal labor and savings wedges based on a recursive approach. We show that habit formation creates a motive for subsidizing labor supply and savings. In particular, habit formation invalidates the well-known no distortion at the top result. We demonstrate that the theoretical findings are quantitatively important: in a parametrized life-cycle model, average labor and savings wedges fall by more than one-third compared with the case of time-separable preferences. (C) 2014 Elsevier B.V. All rights reserved.