On the optimal design of transfers and income-tax progressivity, with P. Grübener, G. Navarro and O. Vardishvili
Axelle Ferriere, Paris School of Economics
Wednesday, October 12, 2022
201 Lorch Hall Map
We study the optimal design of means-tested transfers and progressive income taxes. In a simple analytical model, we demonstrate an optimally negative relation between transfers and income-tax progressivity due to efficiency and redistribution concerns. In a rich dynamic model, we quantify the optimal plan with flexible tax-and-transfer functions. Transfers should be larger than currently in the U.S. and financed with moderate income-tax progressivity. Transfers are key to implement higher progressivity in average than in marginal tax-and-transfer rates, achieving redistribution while preserving efficiency. Quantitatively, the left tail of the income distribution determines optimal transfers, whereas the right tail determines income-tax progressivity.
|Event Type:||Workshop / Seminar|
|Source:||Happening @ Michigan from Department of Economics, Michael Beauregard Seminar in Macroeconomics, Department of Economics Seminars|