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This course studies topics in the optimal design of tax and transfer policies. We will discuss optimal capital and income taxation, optimal estate taxes and other applications. We will study economies where the underlying information structure is explicitly specified, and all tax instruments arise endogenously. Models will be formulated both in discrete and continuous time.
If time permits, we will also discuss other topics, such as long run properties of the efficient allocations, efficient allocations with persistent private information and the implications of hidden savings and endogenous insurance markets. Poslední úprava: Papariga Anna, Mgr. (16.09.2022)
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1. Ramsey Taxation Anthony B. Atkinson and Joseph E. Stiglitz. Lectures on public economics. McGraw Hill, 1980. Alan Auerbach and James R. Hines, Jr. Taxation and Economic Efficiency. Handbook of Public Economics, 2002. *Diamond, P. and Mirrlees, J., Optimal Taxation and Public Production II: Tax Rules, American Economic Review 1971 *Diamond, P., A Many-Person Ramsey Tax Rule, Journal of Public Economics 1975 Christophe Chamley. Optimal taxation of capital income in general equilibrium with infinite lives. Econometrica, 54(3):607-622, 1986 Kenneth L. Judd. Redistributive taxation in a simple perfect foresight model. Journal of Public Economics, 28(1):59-83, 1985. *Chari, V. V., & Kehoe, P. J. (1999). Optimal fiscal and monetary policy. Handbook of Macroeconomics, 1, 1671-1745. *Ivan Werning and Ludwig Straub, Ludwig (2020). Positive Long Run Capital Taxation: Chamley-Judd Revisited. American Economic Review, 110(1), 86-119 Davila, Hong, Krusell, Rios-Rull (2012) ”Constrained efficiency in the neoclassical growth model with uninsurable idiosyncratic shocks”, Econometrica Dyrda, Pedroni (2022). ”Optimal fiscal policy in a model with uninsurable idiosyncratic shocks”, The Review of Economic Studies. V. V. Chari, V.V., Juan Pablo Nicolini and Peter Teles. More on the Optimal Taxation of Capital. Working paper, University of Minnesota Erosa, Andres and Martin Gervais. Optimal taxation in life-cycle economies. Journal of Economic Theory, 105(2):338-369, 2002
2. Production efficiency *Peter A. Diamond and James A. Mirrlees. Optimal taxation and public production I: Production efficiency. American Economic Review, 61(1): pp. 8-27, 1971 Anthony B. Atkinson and Joseph E. Stiglitz. The Design of Tax Structure: Direct versus Indirect Taxation. Journal of Public Economics, 6:55-75, 1976.
3. Static Mirrlees Taxation *Joseph Stiglitz (1988). Pareto efficient and optimal taxation and the new new welfare economics. in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 15, pages 991-1042. James A. Mirrlees. An exploration in the theory of optimum income taxation. The Review of Economic Studies, 38:175-208, 1971 *Peter A. Diamond. Optimal income taxation: an example with a U-shaped pattern of optimal marginal tax rates. American Economic Review, 88:83-95, 1998 * Emmanuel Saez. Using elasticities to derive optimal income tax rates. Review of Economic Studies, 68:205-229, 2001 Florian Scheuer and Ivàn Werning. Mirrlees meets Diamond-Mirrlees: Simplifying Nonlinear Income Taxation. Working paper, 2018. Gregory N. Mankiw and Matthew Weinzierl. The optimal taxation of height: A case study of utilitarian income redistribution. American Economic Journal: Economic Policy, 2(1):155-176, 2010 Florian Scheuer and Casey Rothschild. Redistributive taxation in the Roy model. Quarterly Journal of Economics, 128: 623-668, 2013 Florian Scheuer and Casey Rothschild. Optimal taxation with rent-seeking. Review of Economic Studies, 1225-1262, 2016. Peter Diamond. Income taxation with fixed hours of work. Journal of Public Economics, 13(1):101-110, 1980 Emmanuel Saez, Stefanie Stancheva, and Thomas Piketty. Optimal taxation of top labor incomes: A tale of three elasticities. American Economic Journal: Economic Policy, 2013 Laurence Ales and Christopher Sleet. Taxing top CEO Incomes. American Economic Review, 106(11): 3331-66, 2016. Henrik J. Kleven, Klaus T. Kreiner and Emmanuel Saez. The Optimal Income Taxation of Couples. Econometrica, 77: 537–560, 2009. Bovenberg, A. and Bas Jacobs (2005). Redistribution and Education Subsidies are Siamese Twins, Journal of Public Economics, 89, 2005-2035. Heathcote, Tsujiyama: Optimal Income Taxation: Mirrlees Meets Ramsey, 2021
4. Dynamic Mirrlees Taxation Narayana R. Kocherlakota. The New Dynamic Public Finance. Princeton University Press, 2010 Mikhail Golosov, Aleh Tsyvinski, and Ivàn Werning. New dynamic public finance: a user’s guide. NBER Macroeconomic Annual, 2006 *Mikhail Golosov, Narayana R. Kocherlakota, and Aleh Tsyvinski. Optimal indirect and capital taxation. The Review of Economic Studies, 70:569-587, 2003 Narayana R. Kocherlakota. Zero expected wealth taxes: A Mirrless approach to dynamic optimal taxation. Econometrica, 73:1587-1621, 2005 Emmanuel Farhi and Ivan Werning. Capital taxation: Quantitative explorations of the inverse Euler equation. Working paper, MIT, 2007 Stefania Albanesi and Christopher Sleet. Dynamic optimal taxation with private information. The Review of Economic Studies, 73(1):1-30, 2006 *Mikhail Golosov and Aleh Tsyvinski. Designing optimal disability insurance: A case for asset testing. Journal of Political Economy, 114:257-279, 2006 Borys Grochulski and Narayana R. Kocherlakota. Nonseparable preferences and optimal social security systems. Working paper, Federal Reserve Bank of Minneapolis, 2008 Marek Kapicka. Optimal Mirrleesean Taxation in a Ben-Porath Economy. AEJ: Macroeconomics, 2015 Borys Grochulski and Thomas Piskorski. Risky human capital and deferred capital income taxation. Journal of Economic Theory, 145(3):908-943, 2010. Matthew C. Weinzierl. The surprising power of age-dependent taxes. The Review of Economic Studies, 78:1-29, 2011 Marco Battaglini and Stephen Coate. Pareto efficient income taxation with stochastic abilities. Journal of Public Economics, 92(3-4):844-868, 2008 Emmanuel Farhi and Ivàn Werning. Insurance and taxation over the life-cycle. Review of Economic Studies, 80:596-635, 2012. Mikhail Golosov, Aleh Tsyvinski, and Maxim Troshkin. Optimal dynamic taxes. Working paper, Yale University, 2011 Sebastian Findeisen and Dominik Sachs, Education and optimal dynamic taxation: The role of income-contingent student loans. Journal of Public Economics, 138:1-21, 2016. Stantcheva, S. (2017). Optimal taxation and human capital policies over the life cycle. Journal of Political Economy 125(6), 1931 – 1990 Makris, M. and A. Pavan (2021). Taxation under learning-by-doing. Journal of Political Economy. Fabian Kindermann and Dirk Krueger. High Marginal Tax Rates on the Top 1%? Lessons from a Life Cycle Model with Idiosyncratic Income Risk. Working paper, 2014. Alejandro Badel and Mark Huggett. Taxing Top Earners: A Human Capital Perspective. Working paper, 2014. Mikhail Golosov, John Hassler, Per Krusell, P. and Aleh Tsyvinski. Optimal Taxes on Fossil Fuel in General Equilibrium. Econometrica, 82: 41–88, 2014
5. Persistent Private Information Ana Fernandes and Christopher Phelan. A recursive formulation for repeated agency with history dependence. Journal of Economic Theory, 91(2):223-247, 2000 Yuzhe Zhang. Dynamic contracting, persistent shocks and optimal taxation. Journal of Economic Theory, 144:635-675, 2009 Marek Kapicka. Efficient allocations in dynamic private information economies with persistent shocks: A first-order approach. Review of Economic Studies, 2013 Kenichi Fukushima and Yuichiro Waki. Computing dynamic optimal mechanisms when hidden types are Markov. Working paper, University of Minnesota, 2011
6. Hidden Savings (if time permits) Harold L. Cole and Narayana R. Kocherlakota. Efficient allocations with hidden income and hidden storage. The Review of Economic Studies, 68:523-542, 2001 Alberto Bisin and Adriano Rampini. Markets as beneficial constraints on the government. Journal of Public Economics, 90:601-629, 2006 Narayana R. Kocherlakota. Figuring out the impact of hidden savings on optimal unemployment insurance. Review of Economic Dynamics, 7(3):541-554, July 2004 Ivan Werning. Moral hazard with unobserved endowments: A recursive approach. Working paper, University of Chicago, 2001 Arpad Abraham, Sebastian Koehne, and Nicola Pavoni. On the first order approach in principal-agent models with hidden borrowing and lending. Journal of Economic Theory, 146:1331-1361, 2011 Poslední úprava: Papariga Anna, Mgr. (16.09.2022)
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Grades will be based on the final exam (40%), problem sets (20%), and either a term paper or a referee report + presentation of a selected paper (40%). The term paper can be an original idea, or an extension of an existing paper. It needs to be related to the topics covered in this course and should be about 10-15 pages long. You need to have the topic approved by the end of the Midterm week (November 5). The final draft of the term paper, or the referee report, must be submitted by January 31. Poslední úprava: Papariga Anna, Mgr. (16.09.2022)
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Course Outline · Ramsey Taxation · Production Efficiency · Static Mirrlees Taxation · Dynamic Mirrlees Taxation · Other topics.
Poslední úprava: Papariga Anna, Mgr. (16.09.2022)
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