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High Marginal Tax Rates on the Top 1? Lessons from a Life Cycle Model with Idiosyncratic Income Risk

Kindermann, Fabian ; Krueger, Dirk



Zusammenfassung

This paper argues that high marginal labor income tax rates on top earners are an effective tool for social insurance even when households have high labor supply elasticity, make dynamic savings decisions, and policies have general equilibrium effects. We construct a large scale overlapping generations model with uninsurable labor productivity risk, show that it has a realistic wealth ...

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