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  3. American Economic Review
  4. May 2013
  5. Estate Taxation with Altruism Heterogeneity

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Estate Taxation with Altruism Heterogeneity

  • Emmanuel Farhi
  • Iván Werning
American Economic Review
vol. 103, no. 3, May 2013
(pp. 489–95)
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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.

Citation

Farhi, Emmanuel, and Iván Werning. 2013. "Estate Taxation with Altruism Heterogeneity." American Economic Review, 103 (3): 489–95. DOI: 10.1257/aer.103.3.489

Additional Materials

JEL Classification

  • D14 Personal Finance
  • H21 Taxation and Subsidies: Efficiency; Optimal Taxation
  • H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
  • H31 Fiscal Policies and Behavior of Economic Agents: Household