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Shaping inequality: Progressive taxation under human capital accumulation

Ali Akbari, Danial LU and Fischer, Thomas LU (2021) p.1-74
Abstract
This paper develops a model of human capital accumulation with on-the-job learning subject to obsolescence risk. The model analytically characterizes trade-offs of reforming the level of income tax progressivity and matches well income inequality in the US. An enriched version is used to quantitatively investigate optimal tax progressivity in the US. In contrast to standard models with exogenous income which suggest that progressivity is too low, accounting for endogenous human capital accumulation would call for lower tax progressivity. While optimal from a utilitarian perspective, such a reform mostly benefits individuals at the top 10\% of the earnings distribution, however.
Please use this url to cite or link to this publication:
author
and
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
income inequality, fat tails, progressive income taxation, human capital accumulation, D3, C46, E24, J24, H2
pages
1 - 74
publisher
SSRN
DOI
10.2139/ssrn.3742731
language
English
LU publication?
yes
id
2575a26a-66f6-4c5b-a977-4846bd84db8a
date added to LUP
2025-02-28 15:51:39
date last changed
2025-04-04 14:44:33
@misc{2575a26a-66f6-4c5b-a977-4846bd84db8a,
  abstract     = {{This paper develops a model of human capital accumulation with on-the-job learning subject to obsolescence risk. The model analytically characterizes trade-offs of reforming the level of income tax progressivity and matches well income inequality in the US. An enriched version is used to quantitatively investigate optimal tax progressivity in the US. In contrast to standard models with exogenous income which suggest that progressivity is too low, accounting for endogenous human capital accumulation would call for lower tax progressivity. While optimal from a utilitarian perspective, such a reform mostly benefits individuals at the top 10\% of the earnings distribution, however.}},
  author       = {{Ali Akbari, Danial and Fischer, Thomas}},
  keywords     = {{income inequality; fat tails; progressive income taxation; human capital accumulation; D3; C46; E24; J24; H2}},
  language     = {{eng}},
  note         = {{Working Paper}},
  pages        = {{1--74}},
  publisher    = {{SSRN}},
  title        = {{Shaping inequality: Progressive taxation under human capital accumulation}},
  url          = {{http://dx.doi.org/10.2139/ssrn.3742731}},
  doi          = {{10.2139/ssrn.3742731}},
  year         = {{2021}},
}