Wealth inequality, intergenerational links and estate taxation

Mariacristina De Nardi

No WP-99-13, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: Empirical studies have shown that, for many countries, the distribution of wealth is much more concentrated than the one of labor earnings. We do not have yet a satisfactory model that can generate enough concentration in wealth from the one for earnings. I construct a computable general equilibrium model with overlapping generations in which parents and children are linked by bequests and earnings within families. I show that bequests are important to explain the emergence of large estates that characterize the top of the wealth distribution and that the introduction of a bequest motive generates lifetime saving profiles more consistent with the data. Moreover, allowing for earnings persistence within families generates an even more concentrated wealth distribution. A cross-country comparison between the U.S. and Sweden shows that intergenerational linkages are important also in economies where redistribution programs are more prominent and there is less inequality.

Keywords: Wealth (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (7)

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