The Timing of Intergenerational Transfers, Tax Policy, and Aggregate Savings

David Altig and Steven Davis

American Economic Review, 1992, vol. 82, issue 5, 1199-220

Abstract: The authors analyze an overlapping-generations framework that accommodates two observations: (1) the interest rate on consumption loans exceeds the rate of return to savings and (2) private intergenerational transfers primarily occur early in the life cycle. Assuming altruistically motivated transfers in at least some family lines and other plausible conditions, the authors prove the invariance of capital's steady-state marginal product to government debt, government expenditures, and the tax rates on labor and capital income. The authors show that the tax treatment of household interest payments has powerful effects on capital intensity and aggregate savings in life-cycle and, especially, altruistic linkage models. Copyright 1992 by American Economic Association.

Date: 1992
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Related works:
Working Paper: The Timing of Intergenerational Transfers, Tax Policy, and Aggregate Savings (1991)
Working Paper: The timing of intergenerational transfers, tax policy, and aggregate savings (1989)
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