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Axelle FERRIERE (PSE ) “On the Optimal Design of Transfers and Income-Tax Progressivity”

November 21 @ 12:15 pm - 1:30 pm

The Macroeconomics Seminar:
Time: 12:15 pm – 13:30 pm
Date: 21th of Novembre 2022

Room 3001

Axelle FERRIERE (PSE ) “On the Optimal Design of Transfers and Income-Tax Progressivity”

Abstract : We study the optimal design of means-tested transfers and progressive income taxes. In a simple analytical model, we show that adding a transfer to a loglinear tax induces welfare gains almost as large as in the second-best allocation. Transfers allow for more progressive average than marginal tax-and-transfer rates, achieving redistribution while preserving efficiency. In a rich dynamic model, we quantify the optimal fiscal plan. We use new flexible functions featuring targeted transfers and progressive income taxes, proving a good empirical fit across the income distribution. Transfers should be larger than currently in the U.S. and financed with moderate income-tax progressivity.

Joint work : P. Grübener, G. Navarro and O. Vardishvili

Organizers:
Olivier LOISEL (CREST)

Sponsors:
CREST