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Fiscal policy, composition of intergenerational transfers, and income distribution

Jaime Alonso-Carrera (), Jordi Caballe () and Xavier Raurich ()

No 387, Working Papers from Barcelona School of Economics

Abstract: In this paper, we characterize the relationship between the initial distribution of human capital and physical inheritances among individuals and the long-run distribution of these two variables. In a model with indivisible investment in education, we analyze how the initial distribution of income determines the posterior intergenerational mobility in human capital and the evolution of intragenerational income inequality. This analysis enables us in turn to characterize the effects of fiscal policy on future income distribution and mobility when the composition of intergenerational transfers is endogenous. We find that a tax on inheritance results in both less intergenerational mobility and smaller investment in human capital. However, a tax on labor income may promote human capital accumulation if the education premium is sufficiently high.

Keywords: altruism; Intergenerational Transfers; human capital; income distribution (search for similar items in EconPapers)
JEL-codes: D64 E13 E21 E62 (search for similar items in EconPapers)
Date: 2009-06
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Related works:
Journal Article: Fiscal policy, composition of intergenerational transfers, and income distribution (2012) Downloads
Working Paper: Fiscal policy, composition of intergenerational transfers, and income distribution (2010) Downloads
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