Inequality, taxation and sovereign default risk by Minjie Deng
By: Deng, Minjie
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Material type: 
ArticleSubject(s): IMPUESTOS | INGRESOS FISCALES | DEFICIT PUBLICO | DESIGUALDAD | REDISTRIBUCION | SALARIOS | EMIGRACION | MODELOS ECONOMETRICOS
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American Economic Journal : Macroeconomics v. 16, n. 2, April 2024, p. 217-249Summary: Income inequality and worker migration significantly affect sovereign default risk. Governments often impose progressive taxes to reduce inequality, which redistribute income but discourage labor supply and induce emigration. Reduced labor supply and a smaller high-income workforce erode the current and future tax base, reducing government's ability to repay debt. I develop a sovereign default model with endogenous nonlinear taxation and heterogeneous labor to quantify this effect. In the model, the government chooses the optimal combination of taxation and debt, considering its impact on workers' labor and migration decisions. Income inequality accounts for one-fifth of the average US state government spread.
| Item type | Current location | Home library | Call number | Status | Date due | Barcode |
|---|---|---|---|---|---|---|
| Artículos | IEF | IEF | OP 2137/2024/2-3 (Browse shelf) | Available | OP 2137/2024/2-3 |
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Income inequality and worker migration significantly affect sovereign default risk. Governments often impose progressive taxes to reduce inequality, which redistribute income but discourage labor supply and induce emigration. Reduced labor supply and a smaller high-income workforce erode the current and future tax base, reducing government's ability to repay debt. I develop a sovereign default model with endogenous nonlinear taxation and heterogeneous labor to quantify this effect. In the model, the government chooses the optimal combination of taxation and debt, considering its impact on workers' labor and migration decisions. Income inequality accounts for one-fifth of the average US state government spread.
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