Socially Optimal Wealth Inequality

Pietro Reichlin

No 12873, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: I discuss two alternative notions of social welfare (utilitarian and self-enforcing) in a dynastic model with heterogeneous and persistent degrees of parental altruism and evaluate the implied levels of consumption inequality. Then, I study a decentralization of planning optima in a competitive equilibrium where the only source of inequality arises from intergenerational wealth transmission and I show that the self-enforcing criterion implies a negative tax rate on the less altruistic individuals’ capital income.

Keywords: Wealth; Inequality; Capital taxation (search for similar items in EconPapers)
JEL-codes: D31 E21 H21 J62 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
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