Consumption insurance against wage risk: Family labor supply and optimal progressive income taxation
By: Wu, Chunzan and Krueger, Dirk
.
Material type: 
BookPublisher: American Economic Journal: Macroeconomics Description: 13(1), Jan, 2021: p.79-113.Subject(s): Taxation and Subsidies, Optimal Taxation, Personal Income,Nonbusiness taxes and subsidies,Inheritance and gift taxes, Economics of gender; Non-labor discrimination
In:
American Economic Journal: MacroeconomicsSummary: We show that a calibrated life cycle two-earner household model with endogenous labor supply can rationalize the extent of consumption insurance against shocks to male and female wages, as estimated empirically by Blundell, Pistaferri, and Saporta-Eksten (2016) in US data. In the model, 35 percent of male and 18 percent of female permanent wage shocks pass through to consumption, compared to the empirical estimates of 32 percent and 19 percent. Most of the consumption insurance against permanent male wage shocks is provided through the presence and labor supply response of the female earner. Abstracting from this private intrahousehold income insurance mechanism strongly biases upward the welfare losses from idiosyncratic wage risk as well as the desired extent of public insurance through progressive income taxation. Relative to the standard one-earner life cycle model, the optimal degree of tax progressivity is significantly lower and the welfare gains from implementing the optimal system are cut roughly in half. – Reproduced
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
|---|---|---|---|---|---|---|
Articles
|
Indian Institute of Public Administration | 13(1), Jan, 2021: p.79-113 | Available | AR124741 |
We show that a calibrated life cycle two-earner household model with endogenous labor supply can rationalize the extent of consumption insurance against shocks to male and female wages, as estimated empirically by Blundell, Pistaferri, and Saporta-Eksten (2016) in US data. In the model, 35 percent of male and 18 percent of female permanent wage shocks pass through to consumption, compared to the empirical estimates of 32 percent and 19 percent. Most of the consumption insurance against permanent male wage shocks is provided through the presence and labor supply response of the female earner. Abstracting from this private intrahousehold income insurance mechanism strongly biases upward the welfare losses from idiosyncratic wage risk as well as the desired extent of public insurance through progressive income taxation. Relative to the standard one-earner life cycle model, the optimal degree of tax progressivity is significantly lower and the welfare gains from implementing the optimal system are cut roughly in half. – Reproduced
There are no comments for this item.