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Fiscal policy, composition of intergenerational transfers, and income distribution

Author

Listed:
  • Jaime Alonso-Carrera
  • Jordi Caballé
  • Xavier Raurich

Abstract

In this paper, we characterize the relationship between the initial distribution of human capital and physical inheritances among individuals and the long-run distribution of these two variables. In a model with indivisible investment in education, we analyze how the initial distribution of income determines the posterior inter-generational mobility in human capital and the evolution of intra-generational income inequality. This analysis enables us in turn to characterize the effects of fiscal policy on future income distribution and mobility when the composition of inter-generational transfers is endogenous. We find that a tax on inheritance results in both less inter-generational mobility and smaller investment in human capital. However, a tax on labor income may promote human capital accumulation if the education premium is sufficiently high.

Suggested Citation

  • Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2010. "Fiscal policy, composition of intergenerational transfers, and income distribution," CAMA Working Papers 2010-09, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2010-09
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2017-03/09_alonso-carrera_caballe_raurich_2010.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Chih-Chin Ho & Ching-Yang Lin & Cheng-Tao Tang, 2013. "How Do Income and Bequest Taxes Affect Income Inequality? The Role of Parental Transfers," Working Papers EMS_2013_10, Research Institute, International University of Japan.
    2. Jordi Caballé, 2016. "Intergenerational mobility: measurement and the role of borrowing constraints and inherited tastes," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(4), pages 393-420, November.
    3. Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2016. "Intergenerational Mobility under Education-Effort Complementarity," Working Papers 905, Barcelona Graduate School of Economics.
    4. Chatzouz, Moustafa, 2014. "Government Debt and Wealth Inequality: Theory and Insights from Altruism," MPRA Paper 77007, University Library of Munich, Germany.
    5. Lorenzo Burlon, 2017. "Public expenditure distribution, voting, and growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(4), pages 789-810, August.

    More about this item

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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