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Bequest Taxation and R-G

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  • Emmanuel Farhi
  • Ivan Werning

Abstract

Abstract We analyze the role of the gap r-g between the return of return on capital r and the growth of the economy g rate in a political economy model of bequest taxation. Higher values of r-g lead to higher wealth inequality, and higher and more progressive optimal taxes on bequest. These conclusions hold only under certain specific but reasonable assumptions regarding the bequest motive, the relative magnitudes of bequest and labor income inequality, and the nature of the political economy process.

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  • Emmanuel Farhi & Ivan Werning, 2014. "Bequest Taxation and R-G," Working Paper 175926, Harvard University OpenScholar.
  • Handle: RePEc:qsh:wpaper:175926
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    File URL: http://scholar.harvard.edu/farhi/node/175926
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