We compute the optimal non-linear tax policy for a dynastic economy with uninsurable risk, where generations are linked by dynastic wealth accumulation and correlated incomes. Unlike earlier studies, we take full account of the welfare distribution along the transition to the new steady state...

We compute the optimal non-linear tax policy in a dynastic economy with unin- surable risk, where generations are linked by dynastic wealth accumulation and corre- lated incomes. Unlike earlier studies, we find that the optimal tax policy is moderately regressive. Regressive taxes lead to higher...