Carnegie Mellon University

Taxation and the Redistribution of Wealth

Sevin Yeltekin, Senior Associate Dean of Education, Professor of Economics, speaks about her research on the redistribution of wealth through the tax system.

Video Transcript

I work on macroeconomics and I work specifically on policy issues relating to the macroeconomy. And probably my earliest memory of why I wanted to go into economics and especially macroeconomics is I'm originally from Turkey, and every day I would be sent out to buy basic things like bread and milk, and the prices would change, and I always wanted to understand, how come the prices change almost every day or every week?

I'm very interested in especially redistribution: How we provide services such as retirement, health care, unemployment benefits, education, and how do we do that effectively? So one of the issues that I have worked on was to think about how to redistribute through the taxation system.

Taxes are a contentious issue. People don't usually like to pay taxes, and that's completely normal, but they are necessary because we have to pay for roads, and schools, and airports, and other public goods. And at the same time, we do want to provide some sort of insurance to the people who get adverse shocks during their lifetime, right? They can get sick. They can become disabled, and they can be laid off, and we want to think about how to provide them with some sort of benefit during this time. But we also understand that those can create adverse incentives. If we keep paying people when they're unemployed, clearly they would not have incentives to go out and find employment. So most of my research is about striking the right balance between providing some sort of benefits and insurance but at the same time giving the people the right incentives to become productive members of society.

Most of economics is all about tradeoffs anyway. It's about, on the one hand we have scarce resources; on the other hand we want to distribute them in a particular way. We care about the people who need them the most, but at the same time we also want to distribute them toward people who can use them the best. So there's all of these tensions, and economics is really all about trying to resolve these tensions to the best of our ability and think about designing a system, a policy, a marketplace, whatever have you, to be able to deliver what we want at the end of the day.