Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283845 
Year of Publication: 
2023
Series/Report no.: 
WIDER Working Paper No. 2023/149
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
The COVID-19 pandemic increased public debt and changed the income distribution in many countries. We use a numerical simulation approach to derive optimal nonlinear marginal tax rates for the pre-crisis and crisis periods. We contribute to the literature by examining optimal tax rates numerically for a developing country and by investigating how the tax rates should be changed as a response to a crisis. Our results indicate that the actual extent of redistribution, especially via direct transfers to low-income individuals, should be considerably higher than what the present system offers. Because the crisis increased pre-tax inequality, the tax system should become more redistributive as a response to a crisis. We also demonstrate how a combination of a higher revenue requirement before the crisis and a lower revenue requirement after the crisis increases social welfare.
Subjects: 
COVID-19 pandemic
optimal income taxation
numerical simulation
welfare analysis
JEL: 
H21
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-457-1
Document Type: 
Working Paper

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