Macroeconomic effects of family business inheritance tax reduction: Evidence from South Korea

Jung Joo La

Pacific Economic Review, 2023, vol. 28, issue 3, 446-461

Abstract: This study examines the macroeconomic effects of family business inheritance tax reduction in South Korea using a theoretical model that addresses the problem of a family member's occupational choice decision between being a worker and being an entrepreneur. In contrast with previous studies, the model considers the distribution of firm size. The effect of the reduction in the family business inheritance tax rate on the macroeconomy is positive in this model, whereas it is negative in a model in the literature that does not consider the distribution of firm size when addressing the occupational choice decision. Calibrated results obtained using data for South Korea show that a 50% reduction in the family business inheritance tax rate increases the total labour demand, total real investment, and total sales by 0.13%, 1.88%, and 0.15%, respectively.

Date: 2023
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https://doi.org/10.1111/1468-0106.12415

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