IDEAS home Printed from https://ideas.repec.org/a/oup/restud/v84y2017i3p1264-1305..html
   My bibliography  Save this article

Intergenerational Disagreement and Optimal Taxation of Parental Transfers

Author

Listed:
  • 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," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(3), pages 1264-1305.
    • Handle: RePEc:oup:restud:v:84:y:2017:i:3:p:1264-1305.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/restud/rdw036
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Emmanuel Farhi & Iván Werning, 2010. "Progressive Estate Taxation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(2), pages 635-673.
    2. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-1093, Nov.-Dec..
    3. Narayana R. Kocherlakota, 2005. "Zero Expected Wealth Taxes: A Mirrlees Approach to Dynamic Optimal Taxation," Econometrica, Econometric Society, vol. 73(5), pages 1587-1621, September.
    4. David Laibson & Andrea Repetto & Jeremy Tobacman, 2005. "Estimating Discount Functions with Consumption Choices over the Lifecycle," Levine's Bibliography 784828000000000643, UCLA Department of Economics.
    5. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-957, July.
    6. Kaplow, Louis, 1995. "A note on subsidizing gifts," Journal of Public Economics, Elsevier, vol. 58(3), pages 469-477, November.
    7. B. Douglas Bernheim, 1989. "Intergenerational Altruism, Dynastic Equilibria and Social Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(1), pages 119-128.
    8. Matthias Doepke & Fabrizio Zilibotti, 2017. "Parenting With Style: Altruism and Paternalism in Intergenerational Preference Transmission," Econometrica, Econometric Society, vol. 85, pages 1331-1371, September.
    9. Helmuth Cremer & Pierre Pestieau, 2011. "Wealth and Wealth Transfer Taxation: A Survey," Chapters, in: Emilio Albi & Jorge Martinez-Vazquez (ed.), The Elgar Guide to Tax Systems, chapter 5, Edward Elgar Publishing.
    10. Gruber, Jonathan & Koszegi, Botond, 2004. "Tax incidence when individuals are time-inconsistent: the case of cigarette excise taxes," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1959-1987, August.
    11. 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.
    12. Per Krusell & Burhanettin Kuruşçu & Anthony A. Smith Jr., 2010. "Temptation and Taxation," Econometrica, Econometric Society, vol. 78(6), pages 2063-2084, November.
    13. Stefano DellaVigna & Ulrike Malmendier, 2004. "Contract Design and Self-Control: Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 353-402.
    14. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    15. Wojciech Kopczuk, 2010. "Economics of estate taxation: a brief review of theory and evidence," NBER Working Papers 15741, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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).
    2. Koeniger, Winfried & Zanella, Carlo, 2022. "Opportunity and inequality across generations," Journal of Public Economics, Elsevier, vol. 208(C).
    3. Moser, Christian & Olea de Souza e Silva, Pedro, 2019. "Optimal Paternalistic Savings Policies," MPRA Paper 95383, University Library of Munich, Germany.
    4. 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.
    5. Kang, Minwook, 2022. "The positive impact of investment subsidies on the economy with present-biased consumers," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 229-235.
    6. Christopher W. Kulp & Michael Kurtz & Charles Hunt & Matthew Velardi, 2023. "The distribution of wealth: an agent-based approach to examine the effect of estate taxation, skill inheritance, and the Carnegie Effect," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 18(2), pages 397-415, April.
    7. Yuta Saito & Yosuke Takeda, 2022. "Capital taxation with parental incentives," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(6), pages 1310-1341, December.
    8. Yena Park, 2018. "Optimal Taxation of Inheritance and Retirement Savings," 2018 Meeting Papers 1246, Society for Economic Dynamics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Spencer Bastani & Daniel Waldenström, 2020. "How Should Capital Be Taxed?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 812-846, September.
    2. Minwook Kang, 2019. "Pareto-improving tax policies under hyperbolic discounting," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(3), pages 618-660, June.
    3. Beshears, John & Choi, James J. & Clayton, Christopher & Harris, Christopher & Laibson, David & Madrian, Brigitte C., 2025. "Optimal illiquidity," Journal of Financial Economics, Elsevier, vol. 165(C).
      • John Beshears & James J. Choi & Christopher Clayton & Christopher Harris & David Laibson & Brigitte C. Madrian, 2020. "Optimal Illiquidity," NBER Working Papers 27459, National Bureau of Economic Research, Inc.
    4. Christian Moser & Pedro Olea de Souza e Silva, 2019. "Optimal Paternalistic Savings Policies," Opportunity and Inclusive Growth Institute Working Papers 17, Federal Reserve Bank of Minneapolis.
    5. Carlos Bethencourt & Lars Kunze, 2017. "Temptation and the efficient taxation of education and labor," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 986-1000, November.
    6. Kang, Minwook & Kim, Eungsik, 2023. "A government policy with time-inconsistent consumers," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 44-67.
    7. Yuta Saito & Yosuke Takeda, 2022. "Capital taxation with parental incentives," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(6), pages 1310-1341, December.
    8. Stefanie Stantcheva, 2020. "Dynamic Taxation," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 801-831, August.
    9. Bossi, Luca & Calcott, Paul & Petkov, Vladimir, 2013. "Optimal tax rules and addictive consumption," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 984-1000.
    10. Wojciech Kopczuk, 2012. "Taxation of Intergenerational Transfers and Wealth," NBER Working Papers 18584, National Bureau of Economic Research, Inc.
    11. Decerf,Benoit Marie A & Maniquet,François, 2021. "Fair Inheritance Taxation," Policy Research Working Paper Series 9804, The World Bank.
    12. Emmanuel Farhi & Iván Werning, 2010. "Progressive Estate Taxation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(2), pages 635-673.
    13. Paul Heidhues & Botond Koszegi, 2010. "Exploiting Naivete about Self-Control in the Credit Market," American Economic Review, American Economic Association, vol. 100(5), pages 2279-2303, December.
    14. Peter Diamond & Emmanuel Saez, 2011. "The Case for a Progressive Tax: From Basic Research to Policy Recommendations," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 165-190, Fall.
    15. Stefania Albanesi, 2006. "optimal taxation of entrepreneurial capital with private information," 2006 Meeting Papers 310, Society for Economic Dynamics.
    16. Borys Grochulski & Tomasz Piskorski, 2005. "Optimal wealth taxes with risky human capital," Working Paper 05-13, Federal Reserve Bank of Richmond.
    17. Ivan Werning & Emmanuel Farhi, 2005. "Inequality, Social Discounting and Estate Taxation," 2005 Meeting Papers 358, Society for Economic Dynamics.
    18. Waldenstrom, Daniel & Bastani, Spencer, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," CEPR Discussion Papers 12880, C.E.P.R. Discussion Papers.
    19. Kang, Minwook & Ye, Lei Sandy, 2023. "Dividend and corporate income taxation with present-biased consumers," Journal of Banking & Finance, Elsevier, vol. 152(C).
    20. Antoine Ferey & Benjamin B. Lockwood & Dmitry Taubinsky, 2024. "Sufficient Statistics for Nonlinear Tax Systems with General Across-Income Heterogeneity," American Economic Review, American Economic Association, vol. 114(10), pages 3206-3249, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:84:y:2017:i:3:p:1264-1305.. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/restud .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.