On the optimal design of transfers and income-tax progressivity, with P. Grübener, G. Navarro and O. Vardishvili
Axelle Ferriere, Paris School of Economics
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.
| Building: | Lorch Hall |
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| Website: | |
| Event Type: | Workshop / Seminar |
| Tags: | Economics, seminar |
| Source: | Happening @ Michigan from Department of Economics, Michael Beauregard Seminar in Macroeconomics, Department of Economics Seminars |
