Abstract – We evaluate optimal age-dependent labor income taxes in an environment for which the age-efficiency profile is endogenously determined by human capital investment. The economy is one of overlapping generations in which heterogeneous individuals are exposed to idiosyncratic shocks to their human capital investments, a key element, along with the endogeneity of human capital itself in the determination of optimal age-dependent taxes. Our model is sufficiently rich to study the role of general equilibrium effects, credit market imperfections and different forms of human capital accumulation. The very large welfare gains we find to be generated by age-dependent are lost during the transition to the new steady state if human capital is endogenous.
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janeiro 4, 2010