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Intergenerational links, taxation, and wealth distribution

Author

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  • Wan, Jing
  • Zhu, Shenghao

Abstract

We extend one of the main findings in Bossmann et al. (2007)("Bequests, taxation and the distribution of wealth in a general equilibrium model," Journal of Public Economics, 91, 1247-1271). Bequest motives per se reduce wealth inequality. We show that the result holds for a stronger criterion of inequality comparison between distributions. Bossmann et al. (2007) use the coefficient of varation as the inequality measure. Our Lorenz dominance result implies their result. We also strengthen two other conclusions in Bossmann et al. (2007). Earnings ability inheritance could increase wealth inequality and estate taxes could decrease wealth inequality.

Suggested Citation

  • Wan, Jing & Zhu, Shenghao, 2012. "Intergenerational links, taxation, and wealth distribution," MPRA Paper 39511, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:39511
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    File URL: https://mpra.ub.uni-muenchen.de/39511/1/MPRA_paper_39511.pdf
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    References listed on IDEAS

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    1. Zilcha, Itzhak, 2003. "Intergenerational transfers, production and income distribution," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 489-513, March.
    2. Rothschild, Michael & Stiglitz, Joseph E., 1973. "Some further results on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 188-204, April.
    3. Jess Benhabib & Alberto Bisin & Shenghao Zhu, 2011. "The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents," Econometrica, Econometric Society, vol. 79(1), pages 123-157, January.
    4. Fellman, J, 1976. "The Effect of Transformations on Lorenz Curves," Econometrica, Econometric Society, vol. 44(4), pages 823-824, July.
    5. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 659-684.
    6. Mariacristina De Nardi, 2004. "Wealth Inequality and Intergenerational Links," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 743-768.
    7. James B. Davies & Peter J. Kuhn, 1991. "A Dynamic Model of Redistribution, Inheritance, and Inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 324-344, May.
    8. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 818-857, August.
    9. Bossmann, Martin & Kleiber, Christian & Walde, Klaus, 2007. "Bequests, taxation and the distribution of wealth in a general equilibrium model," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1247-1271, August.
    10. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
    11. Chatterjee, Satyajit, 1994. "Transitional dynamics and the distribution of wealth in a neoclassical growth model," Journal of Public Economics, Elsevier, vol. 54(1), pages 97-119, May.
    12. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-429, June.
    13. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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    Cited by:

    1. Chatzouz, Moustafa, 2014. "Government Debt and Wealth Inequality: Theory and Insights from Altruism," MPRA Paper 77007, University Library of Munich, Germany.

    More about this item

    Keywords

    Wealth inequality; Bequest motives; Inheritance of earings ability; Estate taxes; Lorenz dominance;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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