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Does Redistribution Reduce Inequality?

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  • Davies, James B

Abstract

The steady-state effect on inequality of linear redistributive schemes based on the taxation of earnings, inheritances, or some combination of the two is examined. Dynasties that exhibit asexual reproduction and altruism are modeled. Earnings ability, which may be correlated across generations, is exogenous and drawn from a station ary distribution. Taxing inheritances increases inequality by reducing the inter generational averaging of "luck." Taxing lifetime wealth or income adds a lump-sum tax on earnings, making redistribution more successful. However, this success is sensitive to the relative size of mean earnings and inheritances. Copyright 1986 by University of Chicago Press.

Suggested Citation

  • Davies, James B, 1986. "Does Redistribution Reduce Inequality?," Journal of Labor Economics, University of Chicago Press, vol. 4(4), pages 538-559, October.
  • Handle: RePEc:ucp:jlabec:v:4:y:1986:i:4:p:538-59
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    Cited by:

    1. Zilcha, Itzhak, 2003. "Intergenerational transfers, production and income distribution," Journal of Public Economics, Elsevier, pages 489-513.
    2. Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2015. "Inheritance and wealth inequality: Evidence from population registers," Working Paper Series, Center for Fiscal Studies 2015:3, Uppsala University, Department of Economics.
    3. Jordi Caballé & Ana I. Moro Egido, 2008. "The Effect of Aspirations, Habits, and Social Security on the Distribution of Wealth," ThE Papers 08/02, Department of Economic Theory and Economic History of the University of Granada..
    4. Jordi Caballé & Luisa Fuster, 2000. "Pay-as-you-go social security and the distribution of bequests," Economics Working Papers 468, Department of Economics and Business, Universitat Pompeu Fabra.
    5. Bossmann, Martin & Kleiber, Christian & Walde, Klaus, 2007. "Bequests, taxation and the distribution of wealth in a general equilibrium model," Journal of Public Economics, Elsevier, pages 1247-1271.
    6. Sexauer, Martin & Kleiber, Christian & Wälde, Klaus, 2005. "Bequests, taxation and the distribution of wealth in a general equilibrium model," W.E.P. - Würzburg Economic Papers 61, University of Würzburg, Chair for Monetary Policy and International Economics.
    7. Bucher-Koenen, Tabea & Ziegelmeyer, Michael, 2011. "Who lost the most? Financial Literacy, Cognitive Abilities, and the Financial Crisis," MEA discussion paper series 11234, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    8. Edward Wolff & Maury Gittleman, 2014. "Inheritances and the distribution of wealth or whatever happened to the great inheritance boom?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, pages 439-468.
    9. Zhu, Shenghao, 2013. "Comparisons of stationary distributions of linear models," Economics Letters, Elsevier, pages 221-223.
    10. Thijs ten Raa & José Manuel Rueda-Cantuche, 2009. "The Construction of Input–Output Coefficients Matrices in an Axiomatic Context: Some Further Considerations," World Scientific Book Chapters,in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 6, pages 77-101 World Scientific Publishing Co. Pte. Ltd..
    11. Axel Dreher & Jan-Egbert Sturm, 2006. "Do IMF and World Bank influence voting in the UN general assembly?," KOF Working papers 06-137, KOF Swiss Economic Institute, ETH Zurich.

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