• Corpus ID: 28648900

On the Optimality of Progressive Income Redistribution

@inproceedings{Bakis2012OnTO,
  title={On the Optimality of Progressive Income Redistribution},
  author={Ozan Bakis and Barı̧s Kaymak},
  year={2012}
}
We compute the optimal non-linear tax policy for a dynastic economy with uninsurable risk, where generations are linked by dynastic wealth accumulation and correlated incomes. Unlike earlier studies, we find that the optimal long-run tax policy is moderately regressive. Regressive taxes lead to higher output and consumption, at the expense of larger after-tax income inequality. Nevertheless, equilibrium effects and the availability of self-insurance via bequests mitigate the impact of… 

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