Wealth inequality, family background, and estate taxation

Mariacristina De Nardi and Fang Yang

Journal of Monetary Economics, 2016, vol. 77, issue C, 130-145

Abstract: This paper generates two main contributions. First, it provides a new theory of wealth inequality that merges two empirically relevant forces generating inequality: bequest motives and inheritance of ability across generations; and an earnings process that allows for more earnings risk for the richest. Second, it uses the resulting calibrated framework to study the effects of changing estate taxation. Increasing the estate tax reduces the wealth concentration in the hands of the richest few and the economic advantage of being born to a rich and super-rich family at the cost of reduced aggregate capital and output. However, all of these effects are quite small. In contrast, increasing estate taxation can generate a significant welfare gain to a newborn under the veil of ignorance, but this comes at a large welfare cost for the super-rich.

Keywords: Wealth inequality; Parental background; Estate taxation; Bequests; Earnings shocks (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393215001245
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Wealth Inequality, Family Background, and Estate Taxation (2015)
Working Paper: Wealth Inequality, Family Background, and Estate Taxation (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:77:y:2016:i:c:p:130-145

DOI: 10.1016/j.jmoneco.2015.10.005

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().