Intergenerational Disagreement and Optimal Taxation of Parental Transfers | Zendy

Nicola Pavoni | Zendy; Hakkı Yazici | Zendy

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Intergenerational Disagreement and Optimal Taxation of Parental Transfers

Author(s) -

Nicola Pavoni,

Hakkı Yazici

Publication year - 2016

Publication title -

the review of economic studies

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 15.641

H-Index - 141

eISSN - 1467-937X

pISSN - 0034-6527

DOI - 10.1093/restud/rdw036

Subject(s) - economics , normative , pareto principle , offspring , perspective (graphical) , differentiable function , microeconomics , class (philosophy) , pregnancy , mathematical analysis , philosophy , operations management , mathematics , epistemology , artificial intelligence , biology , computer science , genetics

We study optimal taxation of bequests and inter vivos transfers in a model where altruistic parents and their offspring disagree on intertemporal trade-offs. We show that the laissez-faire equilibrium is Pareto inefficient, and whenever offspring are impatient from their parents’ perspective, optimal policy involves a positive tax on parental transfers. Cautioned by the technical complications present in this class of models, our normative prescriptions do not rely on the assumption of differentiability of the agents’ policy functions.

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