2014 Fiscal Year Final Research Report
Dynamic Optimal Income Taxation and Redistribution with Extensive Labor
| Project/Area Number |
25780191
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| Research Category |
Grant-in-Aid for Young Scientists (B)
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| Allocation Type | Multi-year Fund |
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| Research Field |
Public finance/Public economy
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| Research Institution | Shizuoka University |
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Principal Investigator |
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| Project Period (FY) |
2013-04-01 – 2015-03-31
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| Keywords | 動学的最適所得税 / 再分配政策 / 非分割可能な労働 / 資本所得税 |
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| Outline of Final Research Achievements |
In this study, we investigate the dynamic optimal labor income taxation with extensive labor supply response and propose incentive compatible redistribution policies. We assume that households face stochastic preference/productivity shocks, which are privately informed, and can make hidden savings. We calculate the optimal allocation of an example economy and show that it is implementable in a market economy by imposing taxes on labor income history. The optimal allocation is not, however, implementable under ordinary labor income taxation. Given this limitation, we propose two social security policies that can supplement the ordinary income taxation: one is a compulsory pension insurance system and the other is the provision of a limited times benefit to low-income households. We find that the combination of ordinary income taxation and either of these two supplemental policies makes the optimal allocation implementable.
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| Free Research Field |
財政学
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