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Inheritance taxation in a model with intergenerational time transfers

Pascal Belan () and Erwan Moussault ()

No 2018-05, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: We consider a two-period overlapping generation model with rational altruism a la Barro, where time transfers and bequests are available to parents. Starting from a steady state where public spendings are nanced through taxation on capital income and labor income, we analyze a tax reform that consists in a shift of the tax burden from capital income tax towards inheritance tax. In the standard Barro model with no time transfer and inelastic labor supply, such a policy decreases steady-state welfare. In our setting, inheritance tax modi es parent's trade-o between time transfers and bequests. We identify situations where the tax reform increases welfare for all generations. Welfare improvement mainly depends on the magnitude of the e ect of higher time transfers on the labor supply of the young.

Keywords: family transfers; altruism; time transfers; inheritance tax. (search for similar items in EconPapers)
JEL-codes: D64 H22 H24 J22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-lma, nep-pbe and nep-pub
Date: 2018
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