Fiscal Policy with Agents Differing in Altruism and in Ability

Philippe Michel and Pierre Pestieau ()

No 4254, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 à la Ricardo, while increasing inequality. Also, estate taxation can be Pareto worsening even though it fosters income equality.

Keywords: Altruism; D64; estate tax; public debt; social security (search for similar items in EconPapers)
JEL-codes: E62 H20 H55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-pbe
Date: Written
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Working Paper: Fiscal policy with agents differing in altruism and in ability (2002)
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