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Estate tax and lifetime income inequality

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  • Jiang, Lily
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    Abstract

    This paper constructs a heterogeneous, intertemporal general equilibrium framework which integrates both intended and unintended bequest motives to examine the long-run effects of an estate tax on the inequality of lifetime income. The results are ambiguous in general and sensitive to the type of transfer motive involved. We find that in the purely intended bequest case, an estate tax increases the steady-state inequality of net lifetime income in the case where people's elasticity of intertemporal substitution is greater than one. However, in the purely unintended bequest case, the effect of an estate tax on inequality is dependent on the probability of survival.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 27 (2010)
    Issue (Month): 3 (May)
    Pages: 613-619

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    Handle: RePEc:eee:ecmode:v:27:y:2010:i:3:p:613-619

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    Web page: http://www.elsevier.com/locate/inca/30411

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    Keywords: Transfer motives Estate tax Income inequality;

    References

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    1. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(6), pages 1153-89, December.
    2. Menchik, Paul L & David, Martin, 1983. "Income Distribution, Lifetime Savings, and Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 672-90, September.
    3. Joseph E. Stiglitz, 1978. "Notes on Estate Taxes, Redistribution, and the Concept of Balanced Growth Path Incidence," NBER Chapters, in: Research in Taxation, pages 137-150 National Bureau of Economic Research, Inc.
    4. Bernheim, B Douglas, 1991. "How Strong Are Bequest Motives? Evidence Based on Estimates of the Demand for Life Insurance and Annuities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(5), pages 899-927, October.
    5. Laitner, John & Ohlsson, Henry, 1998. "Bequest Motives: A Comparison of Sweden and the United States," Working Paper Series, Uppsala University, Department of Economics 1998:16, Uppsala University, Department of Economics.
    6. CREMER, Helmuth & PESTIEAU, Pierre, . "Non-linear taxation of bequests, equal sharing rules and the tradeoff between intra- and inter-family inequalities," CORE Discussion Papers RP -1495, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Caballe, J., 1991. "Endogeneous Growth, Human Capital and Bequests in a Life-Cycle Model," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 158.91, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    8. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1995. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 65, Boston University, Institute for Economic Development.
    9. Tomes, Nigel, 1981. "The Family, Inheritance, and the Intergenerational Transmission of Inequality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 928-58, October.
    10. Hurd, Michael D, 1987. "Savings of the Elderly and Desired Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 298-312, June.
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    Cited by:
    1. Gahramanov, Emin, 2013. "Survival misperception, time inconsistency, and implications for life-cycle saving and welfare," Economic Modelling, Elsevier, Elsevier, vol. 32(C), pages 539-550.

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