We analyze optimal taxation of labor and capital income in a life-cycle framework with idiosyncratic income risk. We … provide a novel decomposition of labor income tax formulas into a redistribution and an insurance component. The latter is … independent of the social welfare function and determined by the degree of income risk and risk aversion. The optimal linear …

households less than half of human capital risk is insured and the welfare losses due to the lack of insurance range from 3 … populated by a large number of long-lived, risk-averse households with homothetic preferences who can invest in risk …-free physical capital and risky human capital. Households have access to a complete set of credit and insurance contracts, but their …

households less than half of human capital risk is insured and the welfare losses due to the lack of insurance range from 3 … populated by a large number of long-lived, risk-averse households with homothetic preferences who can invest in risk …-free physical capital and risky human capital. Households have access to a complete set of credit and insurance contracts, but their …