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.

“Come and live in my Shoes”: Food Access and social isolation for People living in poverty IN GANANOQUE, Ontario

This community-based research project, in collaboration with the Gananoque and Area Food Access Network (GAFAN), gathered data from self-reported food insecure residents of Gananoque and area to determine how to improve their access to healthy, personally acceptable food. In March 2016, I recruited 14 participants for three focus groups and one personal interview with those struggling to put food on the table for themselves and others in the household. Participants were single parents, adults over the age of 50, and adults who could benefit from improved access to healthy food but do not currently use existing services. Health issues, social isolation, scraping by, and lack of income were four themes that underscored the impact of poverty on the lives of participants. Lack of income, transportation, cost of food, lack of affordable or accessible childcare, and inadequate access to support services proved to be major barriers to food security: strongly influenced by the impact of rurality. The results of this research have the potential to help GAFAN improve food access for those living in this community. It may also have implications for enhancing food security in other rural Canadian communities.