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Fiscal policy with agents differing in altruism and in ability


  • MICHEL, Philippe
  • PESTIEAU, Pierre


This paper presents an overlapping generations model of growth with individuals differing in productivity and altruism. Within such a model wealth is entirely held in the steady-state by the families with the highest degree of altruism. We then look at the macroeconomic and distributive effects of three fiscal policies: public debt, pay-as-you-go social security and estate taxation. Under plausible assumption we show that both public debt and social security are neutral A la Ricardo but increase inequality. We also show that a estate taxation can be Pareto worsening even though it can foster income equality.

Suggested Citation

  • MICHEL, Philippe & PESTIEAU, Pierre, 2002. "Fiscal policy with agents differing in altruism and in ability," CORE Discussion Papers 2002049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2002049

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    References listed on IDEAS

    1. N. Gregory Mankiw, 2000. "The Savers-Spenders Theory of Fiscal Policy," American Economic Review, American Economic Association, vol. 90(2), pages 120-125, May.
    2. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    3. Nourry, Carine & Venditti, Alain, 2001. "Determinacy of Equilibrium in an Overlapping Generations Model with Heterogeneous Agents," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 230-255, January.
    4. Falk, Ita & Stark, Oded, 2001. "Dynasties and Destiny: On the Roles of Altruism and Impatience in the Evolution of Consumption and Bequests," Economica, London School of Economics and Political Science, vol. 68(272), pages 505-518, November.
    5. MICHEL, Philippe & PESTIEAU , Pierre, 1994. "Fiscal Policy in a Growth Model with Both Altruistic and Non Altruistic Agents," CORE Discussion Papers 1994049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    7. Joseph E. Stiglitz, 1978. "Notes on Estate Taxes, Redistribution, and the Concept of Balanced Growth Path Incidence," NBER Chapters,in: Research in Taxation, pages 137-150 National Bureau of Economic Research, Inc.
    8. Laitner, John, 2001. "Secular Changes in Wealth Inequality and Inheritance," Economic Journal, Royal Economic Society, vol. 111(474), pages 691-721, October.
    9. Smetters, Kent, 1999. "Ricardian equivalence: long-run Leviathan," Journal of Public Economics, Elsevier, vol. 73(3), pages 395-421, September.
    10. Robert A. Becker, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 375-382.
    11. Weil, Philippe, 1987. "Love thy children : Reflections on the Barro debt neutrality theorem," Journal of Monetary Economics, Elsevier, vol. 19(3), pages 377-391, May.
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    Cited by:

    1. Helmuth Cremer & ) & Pierre Pestieau, 2003. "Wealth Transfer Taxation: A Survey," Public Economics 0311003, EconWPA.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions


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