This Handbook entry presents a conceptual, normative overview of the subject of taxation. It emphasizes the relationships among the main functions of taxation—notably, raising revenue, redistributing income, and correcting externalities—and the mapping between these functions and various...

This paper assesses how a permanent shift from financing a public pay-as-you-go pension by direct (labour income) taxation towards financing it by indirect(consumption) taxation affects the economy and welfare. To this end, we use anoverlapping-generations-augmented two-region general...

Using an OLG model with skill uncertainty and private savings, we investigate whether an optimally designed set of public pension transfers can usefully supplement a nonlinear labor income tax as a welfare-enhancing policy instrument. We consider a Mirrleesian setting where agents' skills are...

This paper incorporates quasi-hyperbolic discounting into a Mirrlees taxation model to study the design of retirement policies for present-biased agents. I show that the government can improve the screening of productivity by exploiting time inconsistency. This is done by providing commitment to...

The unfunded social security has long been criticized for reducing capital stock and social welfare. In this paper, we study the aggregate and welfare effects of reforms that make social security tax (SST) age dependent. We characterize the optimal age-dependent SST schedule that maximizes...

We characterize an optimal redistributive pension scheme when individuals face temptation, but can exert costly self-control (as in Gul & Pesendorfer, 2001; 2004). Our results challenge the common wisdom that forced savings tend to reduce individuals' mental cost of self-control. In our model,...

Conventional wisdom states that the statutory split of payroll taxation between firms and workers is of no macroeconomic relevance, because the tax incidence is fully determined by the market structure. This paper breaks with this view by establishing a theoretical link between the statutory...

In this paper, we consider how the retirement age as well as a tax financed pension system ought to respond to a change in the standard deviation of the length of life. In a first best framework, where a benevolent government exercises perfect control over the individuals' labor supply and...

This paper investigates the inter-temporal structure of implicit taxes that arise in unfunded pension schemes. We demonstrate that these tax rates are declining over the life cycle. Using German micro-data for men and married women we estimate periodic wage elasticities of labour supply in order...

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...