For an economy with altruistic parents facing productivity shocks, the optimal estate taxation is progressive: fortunate parents should face lower net returns on their inheritances. This progressivity reflects optimal mean reversion in consumption, which ensures that a long-run steady state exists with bounded inequality - avoiding immiseration.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12600.
Length: Date of creation: Oct 2006 Date of revision: Handle: RePEc:nbr:nberwo:12600
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Find related papers by JEL classification: E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
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Daron Acemoglu & Michael Golosov & Aleh Tsyvinski, 2007.
"Political Economy of Mechanisms,"
Working Papers
CAS_RN_2007_2, Laboratory for Macroeconomic Analysis.
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