The distribution of wealth: an agent-based approach to examine the effect of estate taxation, skill inheritance, and the Carnegie Effect

Christopher W. Kulp (), Michael Kurtz (), Charles Hunt and Matthew Velardi
Additional contact information
Christopher W. Kulp: Lycoming College
Michael Kurtz: Lycoming College
Charles Hunt: Lycoming College
Matthew Velardi: Lycoming College

Journal of Economic Interaction and Coordination, 2023, vol. 18, issue 2, No 7, 397-415

Abstract: Abstract Wealth inequality has been a topic of recent interest worldwide. One means to address wealth inequality may be through estate taxation. To study the effect of estate taxes on the distribution of wealth, we examine a simple agent-based model where agents live, earn income, die, and pass an inheritance onto the next generation. Taxed estate wealth is then distributed among the population in various ways. We find that estate taxation can be a means of lowering wealth inequality. Furthermore, we examine the effect of skill inheritance and the “Carnegie Effect” on the distribution of wealth. We find that skill inheritance leads to increased inequality in our model, and inclusion of the “Carnegie Effect” (a reduction in labor effort/participation by individuals receiving large bequests) lowers the accumulation of wealth of not only those receiving large bequests but also of low-wealth individuals through a reduction in tax revenue available for redistribution. As such, we show estate taxation up to around 40% increases both efficiency (total wealth) and wealth equity in the modeled economy by encouraging work effort and generating revenue for greater redistribution.

Keywords: Estate tax; Inequality; Carnegie Effect; Agent-based model; Inheritance (search for similar items in EconPapers)
JEL-codes: D31 D63 D64 H21 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11403-022-00372-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:spr:jeicoo:v:18:y:2023:i:2:d:10.1007_s11403-022-00372-7

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11403/PS2

DOI: 10.1007/s11403-022-00372-7

Access Statistics for this article

Journal of Economic Interaction and Coordination is currently edited by A. Namatame, Thomas Lux and Shu-Heng Chen

More articles in Journal of Economic Interaction and Coordination from Springer, Society for Economic Science with Heterogeneous Interacting Agents Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().