TY  - JOUR
AU  - Chetty, Raj
AU  - Saez, Emmanuel
TI  - Optimal Taxation and Social Insurance with Endogenous Private Insurance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14403
PY  - 2008
Y2  - October 2008
DO  - 10.3386/w14403
UR  - http://www.nber.org/papers/w14403
L1  - http://www.nber.org/papers/w14403.pdf
N1  - Author contact info:
Raj Chetty
Department of Economics
Harvard University
Littauer 321
Cambridge, MA 02138
Tel: 617/744-9492
E-Mail: chetty@fas.harvard.edu

Emmanuel Saez
Department of Economics
University of California, Berkeley
530 Evans Hall #3880
Berkeley, CA 94720
Tel: 510/642-4631
Fax: 510/642-6615
E-Mail: saez@econ.berkeley.edu
M1  - published as Raj Chetty, Emmanuel Saez. "Optimal Taxation and Social Insurance with Endogenous Private Insurance," in Roger Gordon and Thomas Piketty, organizers, "Income Taxation, Trans-Atlantic Public Economics Seminar (TAPES)" American Economic Journal: Economic Policy, 2(2), May 2010 (2010)

AB  - This paper characterizes the welfare gains from redistributive taxation and social insurance in an environment where the private sector provides partial insurance.  We analyze stylized models in which adverse selection, pre-existing information, or imperfect optimization in private insurance markets create a role for government intervention. We derive simple formulas that map reduced-form empirical estimates into quantitative predictions for optimal tax and social insurance policy. Applications to unemployment and health insurance show that taking private market insurance into account matters significantly for optimal benefit levels given existing empirical estimates of the key parameters.
ER  -