Christopher Sleet, University of Rochester

We provide optimal tax equations and Pareto test inequalities for dynamic, discrete choice economies. Our framework is flexible enough to accommodate occupations, firms, locations, or skills as states. It permits explicit consideration of the implications of slow choice adjustment for tax design and granular policies that tax income-generating activities rather than incomes themselves. The sensitivity to consumption variation of the stationary distribution of agents across income-generating states emerges as a central ingredient in marginal excess burden calculations and optimal tax analysis. We provide explicit formulas for such sensitivities that relate them to sensitivities of Markov transitions of agents across states and, hence, to structural primitives. We deploy our approach to analyze the optimal tax implications of a rich dynamic model of occupational choice.

DATE: Friday, September 30, 2022

TIME: 3:30-5:00 p.m.

LOCATION: Fronczak 444