Evidence on the insurance effect of marginal income taxes

Marginal income taxes may have an insurance effect by decreasing the effective fluctuations of after-tax individual income. By compressing the idiosyncratic component o personal income fluctuations, higher marginal taxes
Marginal income taxes may have an insurance effect by decreasing the effective fluctuations of after-tax individual income. By compressing the idiosyncratic component o personal income fluctuations, higher marginal taxes should be negatively correlated with the dispersion of consumption across households, a necessary implication of an insurance effect of taxation. Our study empirically examines this negative correlation, exploiting the ample variation of state taxes across US states. We show that taxes are negatively correlated with the consumption dispersion of the within-state distribution of non-durable consumption and that this correlation is robust. JEL Classification: E21, H20, H31
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Metadaten
Author:Charles Grant, Christos Koulovatianos, Alexander Michaelides, Mario Padula
URN:urn:nbn:de:hebis:30-53239
Series (Serial Number):CFS working paper series (2008, 06)
Document Type:Working Paper
Language:English
Date of Publication (online):2008/03/03
Year of first Publication:2008
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2008/03/03
Tag:Consumption Insurance ; Tax Distortions; Undiversifiable Earnings Risk
HeBIS PPN:195434552
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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