01149nam a22001097a 4500008004100000100001700041245005300058260004900111300003200160520079800192773004900990240426b           ||||| |||| 00| 0 eng d  aDeng, Minjie  aInequality, taxation, and sovereign default risk  aAmerican Economic Journal: Microeconomics     a16(2), Apr, 2024: p.217-249  aIncome 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
 
  aAmerican Economic Journal: Microeconomics