Redistribution and social insurance

Mikhail Golosov, Maxim Troshkin, Aleh Tsyvinski

Research output: Contribution to journalArticle

28 Scopus citations

Abstract

We study optimal redistribution and insurance in a life-cycle economy with private idiosyncratic shocks. We characterize Pareto optima, show the forces determining optimal labor distortions, and derive closed form expressions for their limiting behavior. The labor distortions for high-productivity shocks are determined by the labor elasticity and the higher moments of the shock process; the labor distortions for low-productivity shocks are determined by the autocorrelation of the shock process, redistributive objectives, and past distortions. In a model calibrated using newly available estimates of idiosyncratic shocks, the labor distortions are U-shaped and the savings distortions generally increase in current earnings.

Original languageEnglish (US)
Pages (from-to)359-386
Number of pages28
JournalAmerican Economic Review
Volume106
Issue number2
DOIs
StatePublished - Feb 2016

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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    Golosov, M., Troshkin, M., & Tsyvinski, A. (2016). Redistribution and social insurance. American Economic Review, 106(2), 359-386. https://doi.org/10.1257/aer.20111550