Essays in dynamic optimal taxation: working experience, unemployment scarring and poverty

This thesis investigates the design of optimal tax systems in dynamic environments. The first essay characterizes the optimal tax system where wages depend on stochastic shocks and work experience. In addition to redistributive and efficiency motives, the taxation of inexperienced workers depends on a second-best requirement that encourages work experience, a social insurance motive and incentive effects. Calibrations using U.S. data yield higher expected optimal marginal income tax rates for experienced workers for most of the inexperienced workers. They confirm that the average marginal income tax rate increases (decreases) with age when shocks and work experience are substitutes (complements). Finally, more variability in experienced workers' earnings prospects leads to increasing tax rates since income taxation acts as a social insurance mechanism. In the second essay, the properties of an optimal tax system are investigated in a dynamic private information economy where labor market frictions create unemployment that destroys workers' human capital. A two-skill type model is considered where wages and employment are endogenous. I find that the optimal tax system distorts the first-period wages of all workers below their efficient levels which leads to more employment. The standard no-distortion-at-the-top result no longer holds due to the combination of private information and the destruction of human capital. I show this result analytically under the Maximin social welfare function and confirm it numerically for a general social welfare function. I also investigate the use of a training program and job creation subsidies. The final essay analyzes the optimal linear tax system when there is a population of individuals whose perceptions of savings are linked to their disposable income and their family background through family cultural transmission. Aside from the standard equity/efficiency trade-off, taxes account for the endogeneity of perceptions through two channels. First, taxing labor decreases income, which decreases the perception of savings through time. Second, taxation on savings corrects for the misperceptions of workers and thus savings and labor decisions. Numerical simulations confirm that behavioral issues push labor income taxes upward to finance saving subsidies. Government transfers to individuals are also decreased to finance those same subsidies.

Healthcare and the Common Good: Restructuring the Economy of Medical Knowledge through Communitarian Political Theory

The pharmaceutical industry wields disproportionate power and control within the medical economy of knowledge where the desire for profit considerably outweighs health for its own sake. Utilizing the theoretical tools of political philosophy, this project restructures the economy of medical knowledge in order to lessen the oligarchical control possessed by the pharmaceutical industry. Ultimately, this project argues that an economy of medical knowledge structured around communitarian political theory lessens the current power dynamic without taking an anti-capitalist stance. Arising from the core commitments of communitarian-liberalism, the production, distribution, and consumption of medical knowledge all become guided processes seeking to realize the common good of quality healthcare. This project also considers two other theoretical approaches: liberalism and egalitarianism. A Medical knowledge economy structured around liberal political theory is ultimately rejected as it empowers the oligarchical status quo. Egalitarian political theory is able to significantly reduce the power imbalance problem but simultaneously renders inconsequential medical knowledge; therefore, it is also rejected.