The seminar will take place via Zoom - please contakt Simon Reese for zoom number.
You are all welcome to attend. Please find the abstract below.
This paper quantifies optimal tax progressivity in a model in which individuals accumulate human capital on the job (learning-by-doing) under idiosyncratic human capital risk. We also allow for the possibility that human capital becomes completely obsolete. First, we derive analytical expression for both equilibrium inequality and mobility. Our model for income inequality fits the current US evidence well and, accordingly, current US taxation is estimated as already being close to its welfare optimum. Finally, we conclude with a numerical solution of the model in general equilibrium. This richer model also allows for savings as a measure of self-insurance against human capital risk. The general equilibrium scheme simulates an economy while finding social optima given heterogeneous agents. The results from partial equilibrium transfers over well to general equilibrium while allowing for analyzing income and wealth inequality simultaneously.