Efficient taxation with differential risks of dependence and mortality

Nishimura, Yukihiro;Pestieau, Pierre
(2015) , 5 pages

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  • Nishimura, YukihiroUCLouvain
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  • Pestieau, PierreUniversité de Liège
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Abstract
The purpose of this note is to analyze the optimal tax and transfer policies that should be conducted in a society where individuals differ according to their productivity and their risk of mortality and dependency. We show that according to the most reasonable estimates of correlation among these three characteristics, an optimal policy should consist of a tax on earning and second period consumption and of a subsidy on long term care spending. The sign of the tax on saving is ambiguous but we can expect a positive tax on saving in reasonable cases.
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Nishimura, Y., & Pestieau, P. (2015). Efficient taxation with differential risks of dependence and mortality (CORE Discussion Paper 2015/18). https://hdl.handle.net/2078.5/193972