Full Citation

Title: Flexible Retirement and Optimal Taxation

Citation Type: Working Paper

Publication Year: 2017

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Abstract: This paper studies optimal insurance against private idiosyncratic shocks in a life-cycle model with intensive labor supply and endogenous retirement. In this environment, the optimal labor tax is hump-shaped in age: insurance benefits of taxation push for increasing-in-age taxes while rising labor supply elasticities and optimal late retirement of highly productive workers push for lowering taxes for old workers. In calibrated numerical simulations, the optimum achieves sizable welfare gains that age-dependent taxes do not deliver under the status quo US Social Security. Nevertheless, an optimal combination of age-dependent linear taxes with increasing-in-age retirement benefits generates welfare gains close to optimal.

Url: https://ideas.repec.org/p/fip/fedhwp/wp-2018-18.html

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Authors: Ndiaye, Abdoulaye

Series Title: Federal Reserve Bank of Chicago Working Paper Series

Publication Number: 2018-18

Institution: Federal Reserve Bank of Chicago

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Data Collections: IPUMS USA

Topics: Aging and Retirement, Other

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