Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/33914 
Year of Publication: 
2006
Series/Report no.: 
IZA Discussion Papers No. 2277
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
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. This result holds even if the wage tax rate is held constant when introducing bequest taxation. 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.
Document Type: 
Working Paper

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