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Socially Optimal Wealth Inequality

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  • Reichlin, Pietro

Abstract

I discuss two alternative notions of social welfare (utilitarian and self-enforcing) in a dynastic model with heterogeneous and persistent degrees of parental altruism and evaluate the implied levels of consumption inequality. Then, I study a decentralization of planning optima in a competitive equilibrium where the only source of inequality arises from intergenerational wealth transmission and I show that the self-enforcing criterion implies a negative tax rate on the less altruistic individuals’ capital income.

Suggested Citation

  • Reichlin, Pietro, 2018. "Socially Optimal Wealth Inequality," CEPR Discussion Papers 12873, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12873
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    References listed on IDEAS

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    More about this item

    Keywords

    Wealth; Inequality; Capital taxation;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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