Fiscal Policy with Agents Differing in Altruism and in Ability
31 Pages Posted: 5 Mar 2004
Date Written: February 2004
Abstract
This Paper explores the effects of a menu of inter-generational fiscal policies (public debt financed by taxes, PAYG social security system and inheritance taxation) in an overlapping generations model with perfect altruism. It generalizes the model by Barro (1974) by introducing intra-generational heterogeneity. In other words, households differ in productivity and altruism. Within such a model, wealth is entirely held in the steady-state by the families with the highest degree of altruism. Under plausible assumptions, both public debt and social security are neutral a la Ricardo, while increasing inequality. Also, estate taxation can be Pareto worsening even though it fosters income equality.
Keywords: Altruism, public debt, social security, estate tax
JEL Classification: D64, E62, H20, H55
Suggested Citation: Suggested Citation
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