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Accidental Bequests: A Curse for the Rich and a Boon for the Poor *
Author(s) -
Cremer Helmuth,
Gahvari Firouz,
Pestieau Pierre
Publication year - 2012
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.1467-9442.2012.01728.x
Subject(s) - bequest , inheritance tax , economics , schedule , accidental , population , curse , demographic economics , labour economics , public economics , tax reform , demography , political science , state income tax , sociology , physics , management , acoustics , anthropology , law
When accidental bequests signal otherwise unobservable individual characteristics, such as productivity and longevity, the population should be partitioned into two groups: those who do not receive an inheritance and those who do. The first tagged group receives a Mirrlees second‐best tax schedule; the second group, when its type is fully revealed, faces a first‐best tax schedule. Receiving an inheritance makes high‐ability types worse off and low‐ability types better off. High‐ability individuals face a bequest tax of more than 100 percent, while low‐ability types face a bequest tax that can be smaller, as well as larger, than 100 percent, and it might even be negative.