Alexandre Gaillard, "Wealth, Returns, and Taxation: A Tale of Two Dependencies"

Job talk. Alexandre Gaillard is a PhD candidate in Economics at the Toulouse School of Economics. He will present the paper "Wealth, Returns, and Taxation: A Tale of Two Dependencies".

Photo of Alexandre Gaillard

Alexandre Gaillard

Abstract

We study wealth redistribution in a framework where individual portfolio choices and associated returns are correlated with wealth through: (i) type dependence, which reflects that investment skills drive return differences, and (ii) scale dependence, which captures that wealth itself triggers returns. Using an analytical framework, we argue that several common heterogeneous agent models can be understood through the lens of a type and scale dependence representation. We show that four key statistics characterize the macroeconomic and welfare implications of wealth taxation: the right tail of the wealth distribution, the degree of scale and type dependence, and the extent to which returns reflect investment productivity. We then build a quantitative model calibrated using micro US data and find an optimal marginal wealth tax rate of 0.8 percent above an exemption level of $550K. The result is driven by two opposing forces. Under scale dependence, productivity and wealth accumulation decrease with the tax, as risk-taking depends on wealth. Under type dependence, a higher wealth tax reinforces the selection of skilled investors at the top and improves productivity. Finally, the marginal wealth tax only slightly increases when returns partially reflect rent motives, as both forces almost quantitativey offset each other.

Read the paper [pdf]

Host: Martin Blomhoff Holm

 

Published Jan. 5, 2022 10:54 AM - Last modified Jan. 12, 2022 3:50 PM