Fiscal Policy, Composition of Intergenerational Transfers, and Income Distribution

CAMA Working Paper No. 9/2010

32 Pages Posted: 31 Aug 2010

See all articles by Jaime Alonso-Carrera

Jaime Alonso-Carrera

University of Vigo - Faculty of Economics and Business

Jordi Caballé

Autonomous University of Barcelona - Department of Economics and Economic History; Universitat Autonoma de Barcelona; Barcelona Graduate School of Economics (Barcelona GSE)

Xavier Raurich

University of Barcelona

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

Alonso-Carrera, Jaime and Caballe Vilella, Jordi and Caballe Vilella, Jordi and Raurich, Xavier, Fiscal Policy, Composition of Intergenerational Transfers, and Income Distribution (June 26, 2009). CAMA Working Paper No. 9/2010, Available at SSRN: https://ssrn.com/abstract=1668148 or http://dx.doi.org/10.2139/ssrn.1668148

Jaime Alonso-Carrera (Contact Author)

University of Vigo - Faculty of Economics and Business ( email )

As Lagoas Marcosende s/n
36200 Vigo
Spain
34 986812504 (Phone)
34 986812401 (Fax)

Jordi Caballe Vilella

Autonomous University of Barcelona - Department of Economics and Economic History ( email )

Edifici B - Campus Bellaterra
Barcelona, 08193
Spain
34 - 93 - 581 32 64 (Fax)

Universitat Autonoma de Barcelona ( email )

Dept. d'Economia i Historia Economica
Edifici B
Bellaterra, Barcelona 08193
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Xavier Raurich

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

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