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Inheritance taxation with agents differing in altruism

Author

Listed:
  • Pascal Belan
  • Erwan Moussault
  • pascal.belan@u-cergy.fr

    (Université de Cergy-Pontoise, THEMA)

Abstract

We analyze a shift from capital income tax towards inheritance tax in a two-period overlapping generation model with rational altruism `a la Barro, where the population consists of two types of dynasties that differ in altruism. The tax reform is implemented in a way that leaves the capital-labor ratio unchanged in steady state. With inelastic labor supply, the tax reform increases welfare of the less altruistic dynasties, but decreases welfare of the most altruistic ones. We then extend the model introducing elastic labor supply and considering that the old can transfer time to their offspring in order to help them in their domestic tasks. In this context, the tax reform can enhance labor supply and increase aggregate resources for consumption of market goods. A shift from capital income tax towards inheritance tax can then be Pareto improving.

Suggested Citation

  • Pascal Belan & Erwan Moussault & pascal.belan@u-cergy.fr, 2018. "Inheritance taxation with agents differing in altruism," THEMA Working Papers 2018-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2018-14
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    Keywords

    altruism; bequests; time transfers; inheritance tax; redistribution.;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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