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Intergenerational Income Mobility and Income Taxation

Musab Kurnaz and Mehmet A. Soytas

No 409, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: We study the impact of income taxation on intergenerational income correlation. We estimate a life cycle dynastic model and conduct counterfactual analysis to observe the effects of various tax regimes. Compared to a no tax environment, a flat tax regime reduces the correlation only by one percentage points. If the flat tax regime provides child benefits, the correlation additionally declines by four percentage points. Finally, if the taxes are progressive, the reduction, which is due to the increase in the fertility rate (quantity) and the decrease in the educational outcome of children (quality), is highly significant (seven percentage points).

Keywords: Dynastic Models; Discrete Choice; Fertility; Income Taxation (search for similar items in EconPapers)
JEL-codes: C13 J13 J22 J62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2019
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