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on Public Economics |
| By: | Burkhard Heer; Mark Trede |
| Abstract: | We develop a medium-scale overlapping-generations model with endogenous labour supply and skill premium to study optimal income redistribution using progressive labour income taxes and pensions. The model is calibrated to the four countries USA, Great Britain, Italy and Germany which differ substantially in their tax and pension systems, demographics, and skill shares among workers. Optimal pension benefits are proportional to lifetime contributions in all four countries, while the optimal degree of income progressivity varies systematically with country characteristics such as the size of the social security system, demographics or the skill share in the labour force. Optimal income taxes should be more progressive in the United States and Great Britain and much less progressive in the continental countries, Italy and Germany. Population ageing further reduces the optimal extent of income redistribution. |
| Keywords: | inequality, income distribution, skill premium, overlapping generations, social security, progressive taxation, pension schedule |
| JEL: | C68 D31 H21 H24 H55 J11 J26 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12938 |
| By: | Robert Dur (Erasmus University Rotterdam); Anja Schöttner (Humboldt-Universität zu Berlin) |
| Abstract: | This paper shows that allocative efficiency may entail high income tax revenues and a basic income. We consider an economy where people consume three types of goods: market goods, public goods, and social goods. The latter are non-priced goods with positive externalities that are produced by citizens in their leisure time. We show that in the absence of income taxes, work hours are too high and social-goods production is too low as compared to the socially optimal levels. We characterize optimal income taxation and develop a set of testable predictions. One implication of the model is that, as wages grow over time, at some point a basic income becomes part of the optimal policy under economically plausible conditions. |
| Keywords: | Allocative efficiency, Basic income, Income taxation, Social goods, Civil society |
| JEL: | D61 D62 H21 H23 H24 |
| Date: | 2026–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260058 |
| By: | Joshua Coven; Sebastian Golder; Arpit Gupta; Abdoulaye Ndiaye |
| Abstract: | Low property taxes amplify lock-in among elderly homeowners, limiting housing access for young families. Raising them reallocates housing toward the young through two channels: capitalization into lower prices reduces required downpayments for financially constrained buyers, a form of embedded leverage, while higher tax obligations raise holding costs for older owners. In our overlapping generations model, raising California’s property taxes to Texas levels increases young homeownership while decreasing elderly homeownership. Removing step-up basis also lowers elderly homeownership, suggesting their tenure is sustained by bequest tax advantages. The tax treatment of housing shapes housing allocation across generations. |
| JEL: | H24 H71 J11 R21 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35587 |
| By: | Marius A. K. Ring; David G. Seim; Gabriel Zucman |
| Abstract: | Tax avoidance through personal holding companies has long been viewed as a key challenge for progressive income taxation. We exploit twenty years of administrative micro-data linking firms to owners in Sweden and Norway to analyze how the use of personal holding companies varies across the income distribution and to quantify its implications in a quasi-experimental setting. About half of the income of the top 0.1% is retained in personal holding companies defined, as in US tax law, as firms for which five or fewer owners own more than 50% of the stock and that derive more than 60% of income from investment income. Event studies of shocks to operational firms’ value-added show that holding companies shield around half of dividend distributions from individual income taxation. Profits tend to remain in holding companies for long periods of time, with cumulative payout rates of 15%–20% over two decades for the highest income groups. Wealth taxes do not provide an effective backstop due to the low valuation (or exemption) of shares in private businesses. As a result, effective tax rates, all taxes included, fall from about 50% for the upper middle class to about 15%–20% among the highest-net-worth individuals. Accounting for income in holding companies erases half of the difference in the 1980–2020 rise of the top 1% fiscal income share between Nordic countries and the United States, where rules penalizing the use of holding companies have been in place since the 1930s. |
| JEL: | D31 H26 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35534 |
| By: | Makoto HASEGAWA; Takafumi SUZUKI |
| Abstract: | Using Japanese customs data on export transactions from 2014 to 2021, we examine how intra- rm exports to the U.S. responded to the large corporate tax cut enacted under the Tax Cuts and Jobs Act of 2017 (TCJA). We observe exports at the rm- product-consignee-year level and identify whether the consignee is a U.S. subsidiary of the exporter. We nd that related-party export prices did not decline relative to unrelated-party export prices following the TCJA, providing no evidence of a pro t- shifting response through transfer pricing. In contrast, export quantities and values in related-party transactions increased in the post-TCJA period relative to those in unrelated-party transactions, with particularly strong responses for intermediate goods. These ndings suggest that the response of intra- rm exports to the TCJA re ected real adjustment rather than pro t-shifting incentives. |
| Keywords: | Intra- rm trade; Transfer pricing; Pro t shifting; Multinational rms; In- ternational taxation |
| JEL: | H25 H26 F23 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:kue:epaper:e-26-001 |
| By: | Roberto Perotti; Luca Sala |
| Abstract: | We introduce the notion of marginal cumulative multiplier — the effect of either government spending or taxation on output holding the other fiscal instrument constant — and apply it to a well known panel of consolidation episodes in 16 countries in the period 1978-2020. In our benchmark specification we estimate a marginal spending multiplier at two years of 1.5 and a marginal tax multiplier close to 0. We also estimate similar multipliers by applying the policy counterfactual method of McKay and Wolf (2023). In an extensive robustness analysis we never find spending multipliers below 1.3 or tax multipliers higher than -1. These findings are seemingly in contrast to those of much of the existing literature on fiscal multipliers, which typically finds higher tax than spending multipliers. We show that this contradiction disappears once the fiscal variables used in the literature are scaled by the proper factor. |
| JEL: | E62 H30 H62 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35653 |
| By: | John Cawley; Mallory Dreyer; Kosali I. Simon |
| Abstract: | One of the most comprehensive fiscal policies to improve diet was adopted by the Navajo Nation; the Healthy Diné Nation Act (HDNA) of 2014-15 consists of two parts: 1) an exemption from sales tax for healthy foods and beverages; and 2) a tax increase on unhealthy foods and beverages. Together, they create a price wedge of 7-8% between healthy and unhealthy foods. We estimate difference-in-difference models and event studies that estimate the effect of the HDNA on a variety of health conditions relating to diet and weight for newborns and mothers which are recorded in birth certificate data. We find no evidence that the HDNA improved these outcomes; our estimates are precise enough to rule out improvements in gestational diabetes as large as those reported for U.S. city SSB taxes. Possible explanations for the null results include incomplete retailer implementation and cross-border shopping. |
| JEL: | H20 H30 I12 I18 J13 J15 L66 Q18 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35662 |
| By: | Karlsson, Jimmy (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Carbon taxation is one of the main policy instruments for reducing greenhouse gas emissions, yet there is still limited evidence on its effects on firms and workers. This paper studies the environmental and economic effects of carbon taxation, with a particular focus on heterogeneity in labor demand across worker groups. I exploit a reform that increased the effective carbon tax for a subset of Swedish manufacturing firms between 2011 and 2018, and combine administrative firm data with matched employer-employee records in a difference-in-differences design. The reform reduced emissions by about 30%, primarily through substitution away from fossil fuels toward biofuels and district heating. It also reduced revenue and employment, with the strongest negative effects concentrated among emission-intensive firms. The employment effects are driven mainly by older workers without a high school degree, although older, highly educated workers are also negatively affected in the most exposed firms. Additional evidence suggests that firms adjusted labor demand primarily through lower hiring rather than higher separations. Scaled by the average increase in effective tax rates (measured in euro per ton CO2), the estimates imply semi-elasticities of -0.58% for emissions and -0.20% for employment among low-educated workers. These results suggest that carbon taxation can substantially reduce industrial emissions, but with concentrated labor-market costs. |
| Keywords: | Carbon taxation; Climate change; Firm performance; Inequality; Employment |
| JEL: | H23 J23 L60 Q52 Q58 |
| Date: | 2026–08–24 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1564 |
| By: | Peter A. Diamond |
| Abstract: | Public pension systems are long-term social contracts operating under persistent economic, demographic, and political uncertainty. Periods of turbulence, marked by financial shocks, changes in longevity, and shifting labour markets, test the capacity of pension institutions to adapt while maintaining adequacy, equity, and legitimacy. Building on earlier joint work on pension economics and reform with Nicholas Barr, this chapter analyses the role of automatic and semi-automatic adjustment mechanisms in public pension design. Drawing on comparative experience from Sweden, Canada, and the United States, we examine mechanisms for maintaining financial balance, the incorporation of life expectancy into retirement age and benefit design, and the accumulation and drawdown phases of defined contribution pensions. We argue that well-designed automatic mechanisms can discipline political decision-making and improve resilience, but only if they are proportionate, transparent, and attentive to distributional and intergenerational consequences. In turbulent times, good pension design does not eliminate the need for political choice; rather, it structures that choice so that adjustment can occur without repeated crises. |
| Keywords: | national pensions, automatic indexing |
| JEL: | H55 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12951 |