Fiscal policy, composition of intergenerational transfers, and income distribution

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

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

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 inter-generational mobility in human capital and the evolution of intra-generational 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 inter-generational transfers is endogenous. We find that a tax on inheritance results in both less inter-generational 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.

JEL-codes: D64 E13 E21 E62 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010-02
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Related works:
Working Paper: Fiscal policy, composition of intergenerational transfers, and income distribution (2015)
Journal Article: Fiscal policy, composition of intergenerational transfers, and income distribution (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2010-09

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