Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/115006 
Year of Publication: 
2008
Series/Report no.: 
NRN Working Paper, NRN: The Austrian Center for Labor Economics and the Analysis of the Welfare State No. 0802
Publisher: 
Johannes Kepler University Linz, NRN - The Austrian Center for Labor Economics and the Analysis of the Welfare State, Linz
Abstract: 
Inheritances create a second distinguishing characteristic of individuals, in addition to earning abilities. We incorporate this fact into an optimum income taxation model with bequests motivated by joy of giving, and show that a tax on inherited wealth is equivalent to a uniform tax on consumption plus bequests. These taxes are desirable according to an intertemporal social objective if, on average, high-able individuals inherit more wealth than low-able. We demonstrate that such a situation results as the outcome of a process with stochastic transition of abilities over generations, if all descendants are more probable to have their parent’s ability rank than any other.
JEL: 
H21
H24
Document Type: 
Working Paper

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