Public Pensions in a Multi-Period Mirrleesian Income Tax Model

26 Pages Posted: 12 Jan 2017

See all articles by Spencer Bastani

Spencer Bastani

IFAU - Institute for Labour Market Policy Evaluation; Linnaeus University - Department of Economics and Statistics; Research Institute of Industrial Economics (IFN)

Soren Blomquist

Uppsala University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Luca Micheletto

University of Milan

Date Written: December 1, 2016

Abstract

Using an OLG model with skill uncertainty and private savings, we investigate whether an optimally designed set of public pension transfers can usefully supplement a nonlinear labor income tax as a welfare-enhancing policy instrument. We consider a Mirrleesian setting where agents' skills are private information and highlight that, even though pensions, by crowding out private savings, adversely affect the achievement of the golden-rule, they can be used as a mimicking-deterring device that makes it easier for the government to achieve the desired redistributive goals.

Keywords: public pensions, dynamic optimal income taxation, capital income taxation, tagging

JEL Classification: H210, H550, H630

Suggested Citation

Bastani, Spencer and Blomquist, Soren and Micheletto, Luca, Public Pensions in a Multi-Period Mirrleesian Income Tax Model (December 1, 2016). CESifo Working Paper Series No. 6206, Available at SSRN: https://ssrn.com/abstract=2897474

Spencer Bastani

IFAU - Institute for Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden

Linnaeus University - Department of Economics and Statistics ( email )

Växjö, 351 06
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Soren Blomquist

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden
+46 18 471 1102 (Phone)
+46 18 471 1478 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Luca Micheletto (Contact Author)

University of Milan ( email )

Via Festa del Perdono, 7
Milan, 20122
Italy

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