Fiscal Policy, Composition of Intergenerational Transfers, and Income Distribution
CAMA Working Paper No. 9/2010
32 Pages Posted: 31 Aug 2010
Date Written: June 26, 2009
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 intergenerational mobility in human capital and the evolution of intragenerational income inequality. This analysis enables us in turn to characterize the effects of scale policy on future income distribution and mobility when the composition of intergenerational transfers is endogenous. We nd that a tax on inheritance results in both less intergenerational mobility and smaller investment in human capital. However, a tax on labor income may promote human capital accumulation if the education premium is suffciently high.
Keywords: Altruism, Intergenerational Transfers, Human Capital, Income Distribution
JEL Classification: D64, E21, E13, E62
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Cyclicality and Sectoral Linkages: Aggregate Fluctuations from Independent Sectoral Shocks
-
Building Blocks of Market Clearing Business Cycle Models
By Kevin M. Murphy, Andrei Shleifer, ...
-
Complementarities and Comovements
By John Shea