Marek Kapicka
University of California, Santa Barbara
Publications 22
We study why capital accumulation in Argentina was slow in the 1990s and 2000s, despite high productivity growth and low international interest rates. We show that limited commitment constraints introduce two mechanisms. First, the response of investment to a total factor productivity increase is muted and short-lived, while the response to a decrease is large and persistent. Second, unlike in a first-best economy, low international interest rates may reduce capital accumulation, because they in...
We study optimal tax policies in a life-cycle economy with risky human capital and permanent ability differences. The optimal policies balance redistribution across agents, insurance against human capital shocks, and incentives to learn and work. In the optimum, i) if utility is separable in labor and learning effort, the inverse labor wedge follows a random walk, ii) if the utility is not separable then the “no distortion at the top” result does not apply, and iii) quantitatively, high-ability ...
4 CitationsSource
#1Marek KapickaH-Index: 6
view all 4 authors...
Capital accumulation in Argentina was slow in the 1990s, despite high total factor productivity (TFP) growth and low international interest rates. A possible explanation for the “missing capital” is that foreign investors were reluctant to take advantage of the high returns to investment seemingly offered by that small open economy under such favorable conditions, on the grounds that previous historical developments had led them to perceive Argentina as a country prone to external debt “opportun...
#1Marek KapickaH-Index: 6
I quantify the welfare gains from introducing history dependent income tax in an incomplete markets framework where individuals face uninsurable random walk idiosyncratic shocks. I assume that the income tax paid is a function of a geometrical weighted average of past incomes, and solve for the optimal weights. I find that the optimal weights on past incomes decline geometrically at a rate equal to the discount rate. The welfare gains from history dependence are large, about 1.77 percent of cons...
#1Tobias Broer (Stockholm University)H-Index: 4
#2Marek Kapicka (Charles University in Prague)H-Index: 6
Last.Paul Klein (Stockholm University)H-Index: 15
view all 3 authors...
In this paper, we study consumption risk sharing when individual income shocks are persistent and not publicly observable, and individuals can default on contracts at the price of financial autarky. We find that, in contrast to a model where the only friction is limited enforcement, our model has observable implications that are similar to those of an Aiyagari (1994) self-insurance model and therefore broadly consistent with empirical observations. However, some of the implied effects of changes...
6 CitationsSource
#1Tobias BroerH-Index: 4
#2Marek KapickaH-Index: 6
Last.Paul KleinH-Index: 15
view all 3 authors...
#1Tobias BroerH-Index: 4
#2Marek KapickaH-Index: 6
Last.Paul KleinH-Index: 1
view all 3 authors...
I characterize optimal taxes in a life-cycle economy where ability and human capital are unobservable. I show that unobservable human capital effectively makes preferences over labor nonseparable across age. I generalize the static optimal tax formulas to account for such nonseparabilities and show how they depend both on own-Frisch labor elasticities and cross-Frisch labor elasticities. I calibrate the economy to US data. I find that the optimal marginal income taxes decrease with age, in contr...
5 CitationsSource
#1Marek KapickaH-Index: 6
I provide a general framework for analyzing the Pareto efficient income taxation in a Mirrlees economy with human capital formation. I show that human capital formation effectively makes preferences nonseparable over labor supply, and derive a tax formula that holds in any Pareto efficient allocation. I compare it with the optimal tax formula in a Ramsey economy, and show that both formulas differ because the Ramsey planner does not take into account intertemporal changes in the earnings distrib...
#1Marek Kapicka (UCSB: University of California, Santa Barbara)H-Index: 6
This article studies efficient allocations in a dynamic private information economy with a continuum of idiosyncratic shocks that are persistent. I develop a first-order approach for this environment and show that the problem has a simple recursive structure that relies on only a small number of state variables, making the problem tractable. I find sufficient conditions that guarantee that the first-order approach is valid. To illustrate the first-order approach I numerically compute the efficie...
57 CitationsSource