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Abstract

This dissertation is a collection of two essays on inequality. The first chapter takes a normative approach to inequality. We start from the normative assumption that not all inequalities are unjust. In particular, we assume that public policy ought to correct inequalities that are caused by differences in skills insofar as they generate poverty but ought to remain neutral towards inequalities generated by different individual preferences over labor choices. We construct social preferences that are consistent with this view in addition to satisfying Pareto efficiency and we derive implications for the taxation of labor income. We calibrate the optimal tax formula to the US and compare it to the current tax and transfer system. One of the most striking features of the optimal tax schedule under these social preferences is the desirability of negative marginal tax rates on low-incomes. Overall, the US tax and transfer system shares many features with the tax scheme that would be designed by a planner whose objective combines reducing poverty with preference responsibility. The second chapter takes an intergenerational perspective on inequality. We measure intergenerational mobility in housing consumption - across surnames - in the US for the period 1940-2012. We translate, under stated assumptions, the figure into an estimated family-level intergenerational elasticity of total consumption of 0.6-0.67 between two successive generations. We also document that blacks have much lower IGE than whites, the Northeast has higher IGE than the South and Midwest, and in particular, the black-white gap in IGE is concentrated in the Northeast. Some of these patterns contrast with the previous literature's analysis of IGE in labor income. We discuss possible mechanisms behind the level of - and the heterogeneity in - the estimated IGE of consumption.

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