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
  • 2021
  • Article
  • Tax Policy and the Economy

Designing, Not Checking, for Policy Robustness: An Example with Optimal Taxation

By: Benjamin B. Lockwood, Afras Sial and Matthew C. Weinzierl
  • Format:Print
ShareBar

Abstract

Economists typically check the robustness of their results by comparing them across plausible ranges of parameter values and model structures. A preferable approach to robustness—for the purposes of policymaking and evaluation—is to design policy that takes these ranges into account. We modify the standard optimal income tax model to include the policymaker’s subjective uncertainty over parameter values, and we characterize robust optimal policy as that which maximizes expected social welfare. After calibrating uncertainty over the elasticity of taxable income from past empirical work and novel survey data on economists’ beliefs, we compare the implied robust optimal marginal tax rates to the alternative benchmark policy based on the best point estimates of relevant parameters. Our results suggest that robust optimal marginal tax rates are typically more progressive than benchmark analyses, raising top marginal tax rates by 5–7 percentage points and generating modest expected welfare gains.

Keywords

Optimal Taxation; Income Tax; Social Welfare; Elasticity; Income; Taxation; Policy

Citation

Lockwood, Benjamin B., Afras Sial, and Matthew C. Weinzierl. "Designing, Not Checking, for Policy Robustness: An Example with Optimal Taxation." Tax Policy and the Economy 35 (2021).
  • Register to Read

About The Author

Matthew C. Weinzierl

Business, Government and the International Economy
→More Publications

More from the Authors

    • April 2022
    • Faculty Research

    The RC Syllabus

    By: Matthew C. Weinzierl
    • 2022
    • Faculty Research

    Prioritarianism and Optimal Taxation

    By: Matti Tuomala and Matthew Weinzierl
    • March 2022
    • Faculty Research

    The United States Space Force (USSF), Multipolarity, and the Military’s Role in the New Space Age

    By: Matthew C. Weinzierl and Brendan L. Rosseau
More from the Authors
  • The RC Syllabus By: Matthew C. Weinzierl
  • Prioritarianism and Optimal Taxation By: Matti Tuomala and Matthew Weinzierl
  • The United States Space Force (USSF), Multipolarity, and the Military’s Role in the New Space Age By: Matthew C. Weinzierl and Brendan L. Rosseau
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
  • Digital Accessibility
Copyright © President & Fellows of Harvard College