Redistribution and Social Insurance

@inproceedings{Golosov2013RedistributionAS,
  title={Redistribution and Social Insurance},
  author={Mikhail Golosov and Maxim Troshkin and Aleh Tsyvinski},
  year={2013}
}
We study optimal redistribution and insurance in a lifecycle economy with privately observed idiosyncratic shocks. We characterize Pareto optima, show the forces that determine the optimal labor distortions, and derive closed form expressions for their limiting behavior. The labor distortions for high-productivity shocks are determined by the labor elasticity and the higher moments of the shock process; the labor distortions for lowproductivity shocks are determined by the autocorrelation of… CONTINUE READING
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