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Estate Taxation, Entrepreneurship, and Wealth

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  • Marco Cagetti
  • Mariacristina De Nardi

Abstract

This paper studies the estate tax in a quantitative framework with business investment, borrowing constraints, estate transmission, and wealth inequality. We find that the estate tax has little effect on the saving and investment decisions of small businesses, but does distort the decisions of larger firms, thereby reducing aggregate output and savings. Removing such distortions by eliminating the estate tax does not necessarily imply that everyone would be better off. If other taxes were raised to reestablish fiscal balance, those at the top of the wealth distribution would experience a large welfare gain, but most of the population would lose. (JEL D31, E21, H22)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.99.1.85
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File URL: http://www.aeaweb.org/aer/data/mar09/20040521_data.zip
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 1 (March)
Pages: 85-111

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:1:p:85-111

Note: DOI: 10.1257/aer.99.1.85
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References

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  4. Joel Slemrod & Wojciech Kopczuk, 2000. "The Impact of the Estate Tax on the Wealth Accumulation and Avoidance Behavior of Donors," NBER Working Papers 7960, National Bureau of Economic Research, Inc.
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  6. Quadrini, Vincenzo, 1999. "The Importance of Entrepreneurship for Wealth Concentration and Mobility," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(1), pages 1-19, March.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Estate taxation is good, end the debate
    by Economic Logician in Economic Logic on 2009-05-27 13:56:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Grossmann, Volker & Strulik, Holger, 2008. "Should Continued Family Firms Face Lower Taxes Than Other Estates?," Hannover Economic Papers (HEP) dp-387, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Berriel, Tiago C. & Zilberman, Eduardo, 2011. "Targeting the Poor: A Macroeconomic Analysis of Cash Transfer Programs," Economics Working Papers (Ensaios Economicos da EPGE) 726, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Robert Feicht & Wolfgang Stummer, 2010. "Complete Closed-form Solution to a Stochastic Growth Model and Corresponding Speed of Economic Recovery preliminary," DEGIT Conference Papers c015_041, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. Sagiri Kitao, 2013. "A life-cycle model of unemployment and disability insurance," Economics Working Paper Archive at Hunter College 442, Hunter College Department of Economics.
  5. Jess Benhabib & Alberto Bisin, 2009. "The distribution of wealth and fiscal policy in economies with finitely lived agents," NBER Working Papers 14730, National Bureau of Economic Research, Inc.
  6. Kitao, Sagiri, 2010. "Short-run fiscal policy: Welfare, redistribution and aggregate effects in the short and long-run," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 2109-2125, October.
  7. Bertrand Gruss & Jose L. Torres, 2012. "Macroeconomic and Welfare Costs of U.S. Fiscal Imbalances," IMF Working Papers 12/38, International Monetary Fund.
  8. Florian Scheuer, 2014. "Entrepreneurial Taxation with Endogenous Entry," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 126-63, May.
  9. Marco Bassetto & Marco Cagetti & Mariacristina De Nardi, 2013. "Credit Crunches and Credit Allocation in a Model of Entrepreneurship," NBER Working Papers 19296, National Bureau of Economic Research, Inc.
  10. Schetter, Ulrich & Gersbach, Hans & Schneider, Maik, 2013. "Taxation, Innovation and Entrepreneurship," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79776, Verein für Socialpolitik / German Economic Association.

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