Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • October 2011
  • Article
  • Review of Economic Studies

The Surprising Power of Age-Dependent Taxes

By: Matthew C. Weinzierl
  • Format:Print
  • | Pages:29
ShareBar

Abstract

This article provides a new, empirically driven application of the dynamic Mirrleesian framework by studying a feasible and potentially powerful tax reform: age-dependent labor income taxation. I show analytically how age dependence improves policy on both the intratemporal and intertemporal margins. I use detailed numerical simulations, calibrated with data from the U.S. PSID, to generate robust policy implications: age dependence (1) lowers marginal taxes on average and especially on high-income young workers and (2) lowers average taxes on all young workers relative to older workers when private saving and borrowing are restricted. Finally, I calculate and characterize the welfare gains from age dependence. Despite its simplicity, age dependence generates a welfare gain equal to between 0.6% and 1.5% of aggregate annual consumption, and it captures more than 60% of the gain from reform to the dynamic optimal policy. The gains are due to substantial increases in both efficiency and equity. When age dependence is restricted to be Pareto-improving, the welfare gain is nearly as large.

Keywords

Taxation; Policy; Age; Income; Mathematical Methods; Welfare; United States

Citation

Weinzierl, Matthew C. "The Surprising Power of Age-Dependent Taxes." Review of Economic Studies 78, no. 4 (October 2011): 1490–1518. (Also Harvard Business School Working Paper, No. 11-114, May 2011.)
  • Find it at Harvard
  • Read Now

About The Author

Matthew C. Weinzierl

Business, Government and the International Economy
→More Publications

More from the Author

    • November–December 2022
    • Harvard Business Review

    Your Company Needs a Space Strategy. Now.

    By: Matthew Weinzierl, Prithwiraj (Raj) Choudhury, Tarun Khanna, Alan MacCormack and Brendan Rosseau
    • October 2022
    • Faculty Research

    Spaceport America, Public Sector Risk-Taking, and Political Accountability (B)

    By: Matthew Weinzierl, Dava Newman, Rebecca Browder and Angela Acocella
    • October 2022
    • Faculty Research

    Spaceport America, Public Sector Risk-taking, and Political Accountability (A)

    By: Matthew Weinzierl, Dava Newman, Rebecca Browder and Angela Acocella
More from the Author
  • Your Company Needs a Space Strategy. Now. By: Matthew Weinzierl, Prithwiraj (Raj) Choudhury, Tarun Khanna, Alan MacCormack and Brendan Rosseau
  • Spaceport America, Public Sector Risk-Taking, and Political Accountability (B) By: Matthew Weinzierl, Dava Newman, Rebecca Browder and Angela Acocella
  • Spaceport America, Public Sector Risk-taking, and Political Accountability (A) By: Matthew Weinzierl, Dava Newman, Rebecca Browder and Angela Acocella
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College