Advanced Search
MyIDEAS: Login to save this paper or follow this series

Estate taxation with warm-glow altruism

Contents:

Author Info

  • Carlos Garriga
  • Fernando Sánchez-Losada

Abstract

This article examines the properties of the optimal fiscal policy in an economy with warm-glow altruism (utility interdependence) and heterogeneous individuals. We propose a new efficiency concept, D-efficiency, that considers an implicit constraint in the act of giving: donors cannot bequeath to donees more than their existing resources. Considering this constraint, we show that the market equilibrium is not socially efficient. The efficient level of bequest transfers can be implemented by the market with estate and labor-income subsidies and a capital-income tax. In the absence of lump-sum taxation, the government faces a trade-off between minimizing distortions and eliminating external effects. The implied tax policy differs from Pigovian taxation since the government's ability to correct the external effects is limited. Finally, we show that the efficiency-equity trade-off does not affect the qualitative features of the optimal distortionary fiscal policy.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://research.stlouisfed.org/wp/2009/2009-004.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2009-004.

as in new window
Length:
Date of creation: 2009
Date of revision:
Handle: RePEc:fip:fedlwp:2009-004

Contact details of provider:
Postal: P.O. Box 442, St. Louis, MO 63166
Fax: (314)444-8753
Web page: http://www.stlouisfed.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Altruism ; Taxation;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Andrés Erosa & Martin Gervais, 1998. "Optimal Taxation in Life-Cycle Economies," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9812, University of Western Ontario, Department of Economics.
  2. Chari, V.V. & Kehoe, Patrick J., 1999. "Optimal fiscal and monetary policy," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 26, pages 1671-1745 Elsevier.
  3. Laurence J. Kotlikoff & Lawrence H. Summers, 1986. "The Contribution of Intergenerational Transfers to Total Wealth: A Reply," NBER Working Papers 1827, National Bureau of Economic Research, Inc.
  4. Mariacristina Nardi, 2004. "Wealth Inequality and Intergenerational Links," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 71, pages 743-768, 07.
  5. William G. Gale & John Karl Scholz, 1991. "Intergenerational Transfers and the Accumulation of Wealth," UCLA Economics Working Papers, UCLA Department of Economics 624, UCLA Department of Economics.
  6. CREMER, Helmuth & PESTIEAU, Pierre, . "Wealth transfer taxation: a survey of the theoretical literature," CORE Discussion Papers RP -1874, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Davies, James B. & Shorrocks, Anthony F., 2000. "The distribution of wealth," Handbook of Income Distribution, Elsevier, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 11, pages 605-675 Elsevier.
  9. Philippe Michel & Pierre Pestieau, 2004. "Fiscal Policy in an Overlapping Generations Model with Bequest-as-Consumption," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(3), pages 397-407, 08.
  10. Carlos Garriga, 2001. "Optimal Fiscal Policy in Overlapping Generations Models," Working Papers in Economics 66, Universitat de Barcelona. Espai de Recerca en Economia.
  11. Laitner, John, 1993. "Intergenerational and interhousehold economic links," Handbook of Population and Family Economics, Elsevier, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 5, pages 189-238 Elsevier.
  12. MICHEL, Philippe & PESTIEAU, Pierre, 1998. "Fiscal policy when individuals differ regarding to altruism and labor supply," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1998040, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. About estate subsidies and capital income taxation
    by Economic Logician in Economic Logic on 2009-09-10 14:41:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. James Bullard & Carlos Garriga & Christopher J. Waller, 2012. "Demographics, redistribution, and optimal inflation," Speech, Federal Reserve Bank of St. Louis 200, Federal Reserve Bank of St. Louis.
  2. Garriga, Carlos & Sánchez-Losada, Fernando, 2009. "Indirect taxation and the welfare effects of altruism on the optimal fiscal policy," Economic Modelling, Elsevier, vol. 26(6), pages 1365-1374, November.
  3. repec:fip:fedlps:y:2012:i:may30 is not listed on IDEAS

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Economic Logic blog

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2009-004. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.