facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium feedback of … optimal aggregate saving rate is independent of income risk. The optimal time-invariant tax on capital is increasing in income … that the optimal steady state saving rate is increasing in income risk if and only if the intertemporal elasticity of …

This paper argues that precautionary savings against uncertain income comprise a large fraction of aggregate savings. A … second-order Taylor-Series approximation of the Euler equations. Using empirical measures of income uncertainty, I find that … precautionary savings comprises up to 56 percent of aggregate life cycle savings. The derived expression for n-period optimal …

When is a wealth tax preferable to a capital income tax? When is the opposite true? More generally, can capital … productivity to those with high productivity. Furthermore, if the capital income tax is adjusted to balance the government's budget … income taxes and show that the optimal mix shifts towards a higher wealth tax and a lower capital income tax as the capital …

The budget constraint requires that, eventually, consumption must adjust fully to any permanent shock to income … stock savers have a target wealth-to-permanent-income ratio; a positive shock to permanent income moves the ratio below its …

greater income uncertainty than others. We first derive an equation characterizing the theoretical relationship between wealth …

function, income risk is found to raise the marginal propensity to consume out of wealth in a multiperiod model with many risky … consumption. It is also a component of the interest elasticity of consumption and the risk aversion of the value function which … marginal propensity to consume within the context of the Permanent Income Hypothesis. Given plausible conditions on the utility …

This paper examines how aversion to risk and aversion to intertemporal substitution determine the strength of the … large risks, we show that decreasing absolute risk aversion guarantees that the precautionary saving motive is stronger than … risk aversion, regardless of the elasticity of intertemporal substitution. Holding risk preferences fixed, the extent to …

response to earnings risk based on Euler equation estimates. To address endogeneity problems, we use Norwegian administrative …