Hellwig, Christian
(2021)
Static and Dynamic Mirrleesian Taxation with Non-separable Preferences: A Unified Approach.
TSE Working Paper, n. 21-1224, Toulouse
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Abstract
I analyze dynamic Mirrlees taxation with preferences that are non-separable between con-
sumption, leisure and type, which determines both ability and consumption needs. I show how
to account for non-separable preferences through a simple change in probability measures. I ge-
neralize the existing Inverse Euler Equation and optimal static labor tax formulae and provide
a unied intuition based on a set of perturbations around the optimal allocations that preserve
expected utility and incentive compatibility. Non-separability in preferences gives rise to a new
tradeo between current and future redistribution that is internalized by the planner's solution
but not by private savings decisions. This leads to a novel rationale to subsidize (tax) savings
and make labor taxes more (less) persistent, when more productive agents also have higher
(lower) consumption needs.
Item Type: | Monograph (Working Paper) |
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Language: | English |
Date: | June 2021 |
Place of Publication: | Toulouse |
Subjects: | B- ECONOMIE ET FINANCE |
Divisions: | TSE-R (Toulouse) |
Institution: | Université Toulouse 1 Capitole |
Site: | UT1 |
Date Deposited: | 15 Jun 2021 14:56 |
Last Modified: | 18 Nov 2021 08:21 |
OAI Identifier: | oai:tse-fr.eu:125745 |
URI: | https://publications.ut-capitole.fr/id/eprint/43619 |