UCL Department of Economics


Redistribution of Return Inequality: Student Work in Progress Seminar

11 February 2021, 10:00 am–11:00 am

UCl building

Karl Schulz (Mannheim) will present his paper on "Redistribution of Return Inequality" in this Student Work in Progress Seminar.

Event Information

Open to



Richard Morgane

Wealthier households obtain higher returns on their investments than poorer ones. How should the tax system account for this return inequality? I study capital taxation in an economy in which return rates endogenously correlate with wealth. The leading example is a financial market, where the rich acquire more financial information than the poor. Contrary to conventional wisdom, rather than calling for more redistribution, the presence of this scale dependence provides a rationale for lower marginal tax rates. The endogeneity of returns generates a feedback effect between wealth and its returns. Therefore, standard elasticity measures that determine the responsiveness of capital to taxes must be revised upwards. At an aggregate level, a rise in redistribution induces a compression effect on the distribution of returns. In the financial market, I identify general equilibrium trickle-up externalities that provide a force for more redistribution relative to the partial equilibrium. Using a panel of US foundations, I estimate the quantitative importance of scale dependence for tax policy.

You can join the session here