Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs
Lukas Mayr,
Dominik Sachs and
Fabian Kindermann
Additional contact information
Lukas Mayr: European University Institute
No 1046, 2017 Meeting Papers from Society for Economic Dynamics
Abstract:
Taxing bequests not only generates direct tax revenue, but can have a positive impact on the labor supply of heirs through wealth effects. This leads to an increase in future labor income tax revenue. How large is this effect? We use a state of the art life-cycle model that we calibrate to the German economy to answer this question. Our model successfully matches quasi-experimental evidence regarding the size of wealth effects on labor supply. Using this evidence directly for a back of the envelope calculation fails because (i) heirs anticipate the reduction in bequests through taxation and adjust their labor supply already prior to the actual act of bequeathing, and (ii) when bequest receipt is stochastic, even those who ex post end up not inheriting anything respond ex ante to a change in the expected size of bequests. We find that for each Euro of bequest tax revenue the government mechanically generates, it obtains an additional 9 Cents of labor income tax revenue (in net present value) through a higher labor supply of (non-)heirs.
Date: 2017
New Economics Papers: this item is included in nep-dge and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2017/paper_1046.pdf (application/pdf)
Related works:
Journal Article: Inheritance taxation and wealth effects on the labor supply of heirs (2020) 
Working Paper: Inheritance taxation and wealth effects on the labor supply of heirs (2020)
Chapter: Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs (2018)
Working Paper: Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs (2018) 
Working Paper: Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs (2018) 
Working Paper: Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs (2018) 
Working Paper: Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs (2018) 
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:red:sed017:1046
Access Statistics for this paper
More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann (chuichuiche@gmail.com).