Optimal Life‐Cycle Capital Taxation Under Self‐Control Problems

Bibliographic Data

ID9714605
AuthorsNicola Pavoni (0000-0003-3086-9447, Bocconi University, IGIER, IFS, and CEPR), Hakki Yazici (Sabancı Üniversitesi), Hakkı Yazıcı (0000-0001-8631-6126, Sabancı Üniversitesi)
Year2017
Volume127
Issue602
Pages1188-1216
Publication date2017-06-01
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/ecoj.12323
OpenAlexW1927902555
LanguageEN
Citations received2
References cited33

We study optimal taxation of savings in an economy where agents face self‐control problems and the severity of these problems possibly depends on age. Focusing on quasi‐hyperbolic discounting, we show that if agents’ ability to self‐control increases concavely with age, then savings should be subsidised and the subsidy should decrease with age. Quantitatively, we find that the optimal subsidies in our calibrated model with age‐dependent self‐control are much larger than those implied by models with constant self‐control. Our optimal subsidies are of comparable magnitudes to those implied by the 401(k) plan, even though the latter prescribes subsidies increasing with age

Capital (architecture · Constant (computer programming · Control (management · Discounting · Economics · Market economy · Mathematical optimization · Microeconomics · Optimal control · Self-control · Subsidy · Computer Science · Finance · Financial Literacy, Pension, Retirement Analysis · Fiscal Policy and Economic Growth · Global Health Care Issues · Mathematics · Psychology

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