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Deficits, Gifts, and Bequests

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  • Daniel Barczyk

    (McGill University)

Abstract

What is the response of aggregate consumption to a deficit-financed tax cut? It is well-known that intergenerational transfers are key to answer this question. I address this issue by studying a heterogeneous-agents overlapping-generations economy with imperfect altruism. The model generates richer and more realistic transfer behavior than a dynastic or an overlapping-generations economy. The model is calibrated to match aggregate data on inter-vivos transfers. I find that the response of aggregate consumption to a deficit-financed tax cut is quantitatively more similar to the overlapping-generations economy's welfare implications, however, tend to be closer to the dynastic economy's.

Suggested Citation

  • Daniel Barczyk, 2013. "Deficits, Gifts, and Bequests," 2013 Meeting Papers 25, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:25
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    References listed on IDEAS

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    Cited by:

    1. Daniel Barczyk & Matthias Kredler, 2014. "A Dynamic Model of Altruistically-Motivated Transfers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 303-328, April.
    2. Bellettini, Giorgio & Taddei, Filippo & Zanella, Giulio, 2017. "Intergenerational altruism and house prices: Evidence from bequest tax reforms in Italy," European Economic Review, Elsevier, vol. 92(C), pages 1-12.
    3. Corina Boar, 2020. "Dynastic Precautionary Savings," NBER Working Papers 26635, National Bureau of Economic Research, Inc.
    4. Daniel Barczyk & Sean Fahle & Matthias Kredler, 2023. "Save, Spend, or Give? A Model of Housing, Family Insurance, and Savings in Old Age," Review of Economic Studies, Oxford University Press, vol. 90(5), pages 2116-2187.

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