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Inheritance taxation in a model with intergenerational time transfers

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  • Pascal Belan

    ()

  • Erwan Moussault

    (Université de Cergy-Pontoise, THEMA)

Abstract

We consider a two-period overlapping generation model with rational altruism a la Barro, where time transfers and bequests are available to parents. Starting from a steady state where public spendings are nanced through taxation on capital income and labor income, we analyze a tax reform that consists in a shift of the tax burden from capital income tax towards inheritance tax. In the standard Barro model with no time transfer and inelastic labor supply, such a policy decreases steady-state welfare. In our setting, inheritance tax modi es parent's trade-o between time transfers and bequests. We identify situations where the tax reform increases welfare for all generations. Welfare improvement mainly depends on the magnitude of the e ect of higher time transfers on the labor supply of the young.

Suggested Citation

  • Pascal Belan & Erwan Moussault, 2018. "Inheritance taxation in a model with intergenerational time transfers," THEMA Working Papers 2018-05, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2018-05
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    References listed on IDEAS

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    1. Cardia, Emanuela & Michel, Philippe, 2004. "Altruism, intergenerational transfers of time and bequests," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1681-1701, June.
    2. Emmanuel Farhi & Iván Werning, 2010. "Progressive Estate Taxation," The Quarterly Journal of Economics, Oxford University Press, vol. 125(2), pages 635-673.
    3. Schoeni, Robert F, 1997. "Private Interhousehold Transfers of Money and Time: New Empirical Evidence," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(4), pages 423-448, December.
    4. Pascal Belan & Pierre-Jean Messe & François-Charles Wolff, 2010. "Postponing retirement age and labor force participation: the role of family transfers," Recherches économiques de Louvain, De Boeck Université, vol. 76(4), pages 347-370.
    5. François-Charles Wolff & Claudine Attias-Donfut, 2007. "Les comportements de transferts intergénérationnels en Europe," Économie et Statistique, Programme National Persée, vol. 403(1), pages 117-141.
    6. Thomas Piketty & Emmanuel Saez, 2013. "A Theory of Optimal Inheritance Taxation," Econometrica, Econometric Society, vol. 81(5), pages 1851-1886, September.
    7. 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..
    8. Philippe Weil, 1987. "Love Thy Children: Reflections on the Barro Debt Neutrality Theorem," Sciences Po publications info:hdl:2441/8711, Sciences Po.
    9. Helmuth Cremer & Pierre Pestieau, 2011. "The Tax Treatment of Intergenerational Wealth Transfers ," CESifo Economic Studies, CESifo, vol. 57(2), pages 365-401, June.
    10. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    11. Emanuela Cardia & Serena Ng, 2003. "Intergenerational Time Transfers and Childcare," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 431-454, April.
    12. 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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    More about this item

    Keywords

    family transfers; altruism; time transfers; inheritance tax.;

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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