Sergio Villalvazo

Optimal taxes on capital in the OLG model with uninsurable idiosyncratic income risk

We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium effects of private precautionary saving on factor prices and taxes capital unless the weight on future generations in the social welfare function is sufficiently … Read more