Abstract:The author studies age-dependent optimal taxation in an environment that takes into consideration changes in consumption behavior over the life cycle due to changes in labor income paths and borrowing limits. Income mobility is defined as an exogenous rate at which individuals change from a low-to a high-income path. In this framework, the role of age-dependent income taxation is reinforced. Consumption and leisure optimal allocations are not constant over the life cycle even when preferences are additively se… Show more
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