English, Article, Journal or magazine article edition: The Dynamics of Optimal Taxation when Human Capital is Endogenous Marek Kapicka

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Bookmark: http://trove.nla.gov.au/version/30569
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The Dynamics of Optimal Taxation when Human Capital is Endogenous
Author
  • Marek Kapicka
Physical Description
  • preprint
Notes
  • This paper characterizes the dynamics of Pareto efficient income taxes in a dynamic economy with human capital accumulation. I extend the tools and insights developed by Mirrlees (1971) into a dynamic framework. I follow Diamond (1998) by assuming that there are no income effects on labor supply. If the government can freely borrow and save, I show that i) the problem of finding efficient allocation can be decomposed into two relatively simple stages and ii) if agents have access to capital market (with zero tax on capital), the efficient allocations may be in some cases implemented in a competitive equilibrium by using history independent income taxes. I compute the sequence of optimal income taxes that implement the optimum and show that they marginal income taxes tend to decrease over time and that the gains from adjustment of human capital are about 12 times larger than the static gains from labor supply adjustment
  • Optimal taxation, private information, human capital
  • RePEc:red:sed006:349
Language
  • English
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