WORKING PAPERS
"Wealth tax, entrepreneurship, market power" - draft available upon request
I study the equity-efficiency trade-off of top wealth taxation in an economy with heterogeneous workers and entrepreneurs, where wealthier entrepreneurs own firms that produce at a larger scale and impose larger markups. Implementing a wealth tax on the wealthiest entrepreneurs only, and uniformly redistributing the tax revenues, reduces aggregate production and equilibrium wage workers receive. Furthermore, the wealth tax reduces the aggregate markup in the economy, increasing the labor share of income accruing to workers. I show that the same top wealth tax induces smaller redistributive effects and higher production losses when entrepreneurs impose homogeneous and constant markups, independent on their firms’ scale of production. I quantify these effects in a dynamic framework calibrated to the US economy in which entrepreneurs accumulate wealth by investing in their own firms. I consider a wealth tax raising 1% of GDP in tax revenues imposed on the wealthiest 1% of households. Depending on the mechanism generating markups heterogeneity across entrepreneurs the wealth tax determines a wage loss for workers 1-1.5 pp lower than in the economy in which all entrepreneurs impose identical markups.
"Portfolio composition effect of wealth taxation" - draft available upon request
In this paper I study how the introduction of a wealth tax imposed on the households at the top of the wealth distribution impacts their portfolio choices and as a consequence the capital allocation in the economy, GDP and GDP growth. In order to do that I develop a household portfolio choice model which is able to replicate some key features of US households’ choices in terms of private equity, public equity and safe assets investments, beside the aggregate investment in each of these investment opportunities. Then, I use this model as a metering device to quantify the effect of wealth taxation on the households’ investment choices. I show that those at the top of the wealth distribution reduce their investment in private equity, in a lower extent they also reduce public equity investment, while they increase investment in safe assets. As a consequence wealth taxation induces a capital reallocation from private (and also public) equity investments to safe assets. Afterwards, I present some evidence on US capital allocation across industries, suggesting that private equity investments are directed towards very productive and high-growth sectors. As a consequence I show that the capital reallocation induced by a wealth tax determines
not only a GDP reduction, which is quantified, but also a GDP growth decrease.
WORK IN PROGRESS
"Optimal subsidies for the working poor in an occupational choice framework"