Optimal Fiscal Policy in a Model with Uninsurable Idiosyncratic Income Risk

• 成果类型: Article
• 署名作者: DYRDA, S. E. B. A. S. T. I. A. N.; PEDRONI, M. A. R. C. E. L. O.
• 署名单位: University of Toronto; University of Amsterdam
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdac031
• 发表日期: 2023
• 页码: 744-780
• 关键词: global optimization methods; optimal taxation; capital income; long-run; transitional dynamics; incomplete markets; government debt; growth-model; WEALTH; progressivity

摘要

We study optimal fiscal policy in a standard incomplete-markets model with uninsurable idiosyncratic income risk, where a Ramsey planner chooses time-varying paths of proportional capital and labour income taxes, lump-sum transfers (or taxes), and government debt. We find that (1) short-run capital income taxes are effective in providing redistribution since the tax base is relatively unequal and inelastic; (2) an increasing pattern of labour income taxes over time mitigates intertemporal distortions from capital income taxes; (3) the optimal policy increases overall transfers, calibrated initially to the US welfare system, by roughly 50%; (4) two-thirds of the welfare gains come from redistribution and the remaining third come mostly from insurance; and (5) redistribution also leads to a more efficient allocation of labour via wealth effects on labour supply-lower productivity households can afford to work relatively less.