Essays on optimal taxation and income risk: estimates for Latin America.

Summary This thesis is an applied study of optimal taxation and income risk in Latin America, with a focus on Argentina, Chile, Colombia and Mexico. Faced with high levels of income inequality, income taxes are an essential redistributive tool for Latin America that, until now, has not been fully exploited. One of the objectives of this thesis is to see how far these countries are at their optimal level of taxation in order to explore the capacity for improvement that this type of burden may have in each of the countries in the study. Income risk is another important characteristic of developing economies such as those found in Latin America. Given their vulnerability to external macroeconomic shocks, these economies tend to be particularly volatile. Under these conditions, individuals in Latin America are subject to higher income risks than individuals in developed countries. The presence of risk has an effect on how agents respond to various changes in the economy. Therefore, the study of risk levels and in particular how riskier incomes affect optimal taxation is one of the pillars of this thesis. Income risk can be decomposed into two elements, permanent and transitory. The last part of this thesis is devoted to assessing to what extent the income risk in each country is caused by a permanent or a transitory component.