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Anasuya Raj (CREST) – "Optimal income taxation in the presence of networks of altruism"
CREST Microeconomics Seminar :
Date: 5th June 2019
Place: Room 3001.
Anasuya Raj (CREST) – “Optimal income taxation in the presence of networks of altruism”
Abstract: This paper characterizes the optimal income tax in the presence of networks of altruism. Individuals take into account the private utility of the individuals in their network on top of their own utility. This materializes through monetary transfers that group members make to each other. Individuals thus have two dimensions of choice: their labor supply and the transfers they make to others. First, I establish the structure of incomes and transfers when there is no governmental intervention. These will depend on the heterogeneity of skill levels and the extent of altruism within groups. Second, I characterize the optimal linear and non-linear income tax schemes and show that the optimal tax rates should potentially adjust downwards. I then run simulations and quantify how important the change in tax rates should be depending on the level of altruism and the heterogeneity of abilities in groups. In an empirical part, I then document the structure of private transfers using survey data from developing and developed countries.
Roxana Fernandez Machado (CREST), Marie Laure Allain (CREST), and Linda Schilling (CREST)
food provided, no registration needed