Inequality, taxation, and sovereign default risk
By: Deng, Minjie
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Material type: 
BookPublisher: American Economic Journal: Microeconomics Description: 16(2), Apr, 2024: p.217-249.
In:
American Economic Journal: MicroeconomicsSummary: Income inequality and worker migration significantly affect sovereign default risk. Governments often impose progressive taxes to reduce inequality, which redistribute income but discourage labor supply and induce emigration. Reduced labor supply and a smaller high-income workforce erode the current and future tax base, reducing government's ability to repay debt. I develop a sovereign default model with endogenous nonlinear taxation and heterogeneous labor to quantify this effect. In the model, the government chooses the optimal combination of taxation and debt, considering its impact on workers' labor and migration decisions. Income inequality accounts for one-fifth of the average US state government spread. –Reproduced
https://www.aeaweb.org/articles?id=10.1257/mac.20210133
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 16(2), Apr, 2024: p.217-249 | Available | AR131741 |
Income inequality and worker migration significantly affect sovereign default risk. Governments often impose progressive taxes to reduce inequality, which redistribute income but discourage labor supply and induce emigration. Reduced labor supply and a smaller high-income workforce erode the current and future tax base, reducing government's ability to repay debt. I develop a sovereign default model with endogenous nonlinear taxation and heterogeneous labor to quantify this effect. In the model, the government chooses the optimal combination of taxation and debt, considering its impact on workers' labor and migration decisions. Income inequality accounts for one-fifth of the average US state government spread. –Reproduced
https://www.aeaweb.org/articles?id=10.1257/mac.20210133
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