Research

Working papers:

Meritocratic Labor Income Taxation

Joint with Kristoffer Berg and Magnus Stubhaug - Draft

Surveys and experiments suggest that people hold workers more responsible for income gains stemming from merit, such as education, than circumstances, such as parental education. This paper shows how to design income taxes that account for merits. First, we introduce social welfare functions that accommodate individual preferences and hold workers responsible for their merits. Second, we show how to map social welfare function primitives into empirically measurable statistics and exploit long-run Norwegian income and family relations register data to examine the relationship between merit and income. Third, we simulate optimal income tax implications of our meritocratic social welfare functions. The result is that accounting for merit leads to lower optimal marginal income tax rates than the utilitarian criterion recommends, but the difference is smaller when workers are not held responsible for merits that are explained by circumstances.

Equity and Efficiency When Needs Differ

Joint with Kristoffer Berg and Paolo Piacquadio - Draft

We re-examine the measurement of welfare and inequality when households have different needs. First, we axiomatically characterize two families of criteria depending on whether households are considered responsible or should be compensated for their different needs. While the difference is of first order importance for social welfare, we prove that this ethical choice has generally a minor role for the measurement of inequality. Second, we extend the results to partial compensation for differences in needs and multidimensional commodity spaces, providing ready to use criteria for the analysis of taxation and redistribution policies.

Intergenerational Mobility, Credit Constraints, and Parental Beliefs

Single authored - Draft coming soon.

This paper shows that within the same institutional setting, i) parental earnings causally affect child earnings, and ii) parental unearned income does not affect child earnings. This apparent puzzle is hard to explain using the standard model of intergenerational transmission of human capital. I show how relaxing the assumption that ability is perfectly observed before investing in human capital can resolve the puzzle. When ability is complementary to human capital and partly inherited across generations, parents rely on their own outcomes to infer their child's ability. This channel implies a causal link between parent earnings and child human capital since parents cannot distinguish between luck and ability perfectly. Lucky (unlucky) parents attribute their good (bad) outcomes to ability and thus overestimate (underestimate) their child's ability, leading to overinvesting (underinvesting) in child human capital.