Deficits, Gifts, and Bequests

Daniel Barczyk

No 25, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: What is the response of aggregate consumption to a deficit-financed tax cut? It is well-known that intergenerational transfers are key to answer this question. I address this issue by studying a heterogeneous-agents overlapping-generations economy with imperfect altruism. The model generates richer and more realistic transfer behavior than a dynastic or an overlapping-generations economy. The model is calibrated to match aggregate data on inter-vivos transfers. I find that the response of aggregate consumption to a deficit-financed tax cut is quantitatively more similar to the overlapping-generations economy's welfare implications, however, tend to be closer to the dynastic economy's.

Date: 2013
New Economics Papers: this item is included in nep-dge and nep-pbe
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