Pareto-improving bequest taxation
Altruistic parents may transfer resources to their offspring by providing education, and by leaving bequests. We show that in the presence of wage taxation, a small bequest tax may improve efficiency in an overlapping-generations framework with only intended bequests, by enhancing incentives of parents to invest in their children’s education. We also calculate an optimal mix of wage and bequest taxes with alternative parameter combinations. In all cases, the optimal wage tax rate is clearly higher than the optimal bequest tax rate, but the latter is generally positive when the required government revenue in the economy is sufficiently high. If educational investment is partly unobservable for the government, these results qualitatively hold also when allowing for education subsidies.
Year of publication: |
2009
|
---|---|
Authors: | Grossman, Volker ; Poutvaara, Panu |
Institutions: | Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München |
Saved in:
Saved in favorites
Similar items by person
-
Social security reform and investment in education: Is there scope for a Pareto improvement?
Köthenbürger, Marko, (2006)
-
Social security reform and investment in education: Is there scope for a Pareto improvement?
Köthenbürger, Marko, (2006)
-
Why is the public sector more labor-intensive? A distortionary tax argument
Poutvaara, Panu, (2008)
- More ...