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Intergenerational Disagreement and Optimal Taxation of Parental Transfers

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  • Nicola Pavoni
  • Hakki Yazici

Abstract

We study optimal taxation of bequests and inter vivos transfers in a model where altruistic parents and their offspring disagree on intertemporal trade-offs. We show that the laissez-faire equilibrium is Pareto inefficient, and whenever offspring are impatient from their parents’ perspective, optimal policy involves a positive tax on parental transfers. Cautioned by the technical complications present in this class of models, our normative prescriptions do not rely on the assumption of differentiability of the agents’ policy functions.

Suggested Citation

  • Nicola Pavoni & Hakki Yazici, 2017. "Intergenerational Disagreement and Optimal Taxation of Parental Transfers," Review of Economic Studies, Oxford University Press, vol. 84(3), pages 1264-1305.
    • Handle: RePEc:oup:restud:v:84:y:2017:i:3:p:1264-1305.
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    File URL: http://hdl.handle.net/10.1093/restud/rdw036
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    References listed on IDEAS

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    1. Kaplow, Louis, 1995. "A note on subsidizing gifts," Journal of Public Economics, Elsevier, vol. 58(3), pages 469-477, November.
    2. Wojciech Kopczuk, 2010. "Economics of estate taxation: a brief review of theory and evidence," NBER Working Papers 15741, National Bureau of Economic Research, Inc.
    3. B. Douglas Bernheim, 1989. "Intergenerational Altruism, Dynastic Equilibria and Social Welfare," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 119-128.
    4. Nicola Pavoni & Hakki Yazici, 2017. "Optimal Life‐cycle Capital Taxation under Self‐control Problems," Economic Journal, Royal Economic Society, vol. 127(602), pages 1188-1216, June.
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    Cited by:

    1. Moser, Christian & Olea de Souza e Silva, Pedro, 2019. "Optimal Paternalistic Savings Policies," MPRA Paper 95383, University Library of Munich, Germany.
    2. Pamela Giustinelli & Nicola Pavoni, 2017. "The Evolution of Awareness and Belief Ambiguity in the Process of High School Track Choice," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 93-120, April.
    3. Winfried Koeniger & Carlo Zanella, 2020. "Opportunity and Inequality across Generations," CESifo Working Paper Series 8099, CESifo.
    4. Vipul Bhatt & Masao Ogaki & Yuichi Yaguchi, 2017. "Introducing Virtue Ethics into Normative Economics for Models with Endogenous Preferences," RCER Working Papers 600, University of Rochester - Center for Economic Research (RCER).
    5. Yena Park, 2018. "Optimal Taxation of Inheritance and Retirement Savings," 2018 Meeting Papers 1246, Society for Economic Dynamics.

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