Working Paper

Optimal Mirrlees Taxation over the Business Cycle

Abstract: This paper analyzes the cyclical properties of the optimal labor wedges in a Mirrleesean business cycle model. Agents value consumption and leisure and receive persistent idiosyncratic shocks to their value of leisure, which are private information. The production structure is identical to a standard real business cycle model with aggregate productivity shocks. Solving the mechanism design problem for a version of this economy calibrated under logarithmic preferences, I find that the optimal labor wedges are approximately constant over the business cycle.

JEL Classification: D39; D82; E32; H21;

https://doi.org/10.21033/wp-2026-19

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2026-09

Number: WP 2026-19