Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/229509 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8691
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We study the impact of endogenous longevity on optimal tax progressivity and inequality in an overlapping generations model with skill heterogeneity. Higher tax progressivity decreases both the longevity gap and net income inequality, but at the expense of lower average lifetime and lower aggregate labor supply and income. We find that the welfare-maximizing income tax is less progressive than in the case of exogenous longevity and that the present US income tax should redistribute less. Our result is robust to the empirically observed range of labor supply elasticity and the assumptions of both missing annuity markets and tax deductibility of private health expenditures.
Subjects: 
health and inequality
demography
second-best
optimal taxation
personal income distribution
overlapping generations
JEL: 
I14
J10
H21
H51
D31
Document Type: 
Working Paper
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