Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284259 
Year of Publication: 
2023
Series/Report no.: 
IFS Working Papers No. 23/33
Publisher: 
Institute for Fiscal Studies (IFS), London
Abstract: 
Individuals vary considerably in how much they earn during their lifetimes. This study examines the role of the tax-and-transfer system in mitigating such inequalities, which could otherwise lead to disparities in living standards. Utilizing a life-cycle model, we determine that taxes and transfers offset 45% of lifetime earnings inequality attributed to differences in productive abilities and education. Additionally, the system insures against 48% of lifetime earnings risk. Implementing a lifetime tax reform linking annual taxes to previous employment could improve the system's insurance capabilities, albeit at the cost of a lower employment rate.
Subjects: 
Lifetime earnings
lifetime income
tax-and-transfer system
taxation
unemployment insurance
disability benefits
social assistance
inequality
redistribution
insurance
education
productive ability
risk
dynamic life-cycle models
JEL: 
D63
H23
I24
I38
J22
J31
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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