American Economic Review Vol. 103 No. 3 2013

Estate Taxation with Altruism Heterogeneity

Emmanuel Farhi¹; Iván Werning²

¹ Harvard University, Littauer Center, 1805 Cambridge Street, Cambridge, MA 02138. · ² MIT Economics Department, Building E52, 50 Memorial Drive, Cambridge, MA 02142.

Abstract

We develop a theory of optimal estate taxation in a model where bequest inequality is driven by differences in parental altruism. We show that a wide range of results are possible, from positive taxes to subsidies. The results depend on redistributive objectives implicit in the cardinal specification of utility and social welfare functions. We propose a normalization that is helpful in classifying these different possibilities. We isolate cases where the optimal policy bans negative bequests and taxes positive bequests, features present in most advanced countries.

DOI

10.1257/aer.103.3.489

Volume

103

Issue

3

Pages

489-495

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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