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Progressive Estate Taxation

Emmanuel Farhi
Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Ivan Werning
Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Universidad Torcuato Di Tella - Departamento de Economia

October 2006

NBER Working Paper No. W12600

Abstract:
For an economy with altruistic parents facing productivity shocks, the optimal estate taxation is progressive: fortunate parents should face lower net returns on their inheritances. This progressivity reflects optimal mean reversion in consumption, which ensures that a long-run steady state exists with bounded inequality - avoiding immiseration.

Working Paper Series

Date posted: November 20, 2006 ; Last revised: March 07, 2007

Suggested Citation

Farhi, Emmanuel and Werning, Ivan, Progressive Estate Taxation (October 2006). NBER Working Paper No. W12600. Available at SSRN: http://ssrn.com/abstract=937301

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Contact Information

Ivan Werning (Contact Author) Massachusetts Institute of Technology (MIT) - Department of Economics ( email ) 50 Memorial Drive Room E52-251 Cambridge, MA 02142 United States 617-452-3662 (Phone) 617-253-1330 (Fax) HOME PAGE: http://econ-www.mit.edu/faculty/iwerning
National Bureau of Economic Research (NBER) 1050 Massachusetts Avenue Cambridge, MA 02138 United States
Universidad Torcuato Di Tella - Departamento de Economia Buenos Aires Argentina
Emmanuel Farhi Harvard University - Department of Economics ( email ) 1875 Cambridge Street Cambridge, MA 02138 United States
National Bureau of Economic Research (NBER) 1050 Massachusetts Avenue Cambridge, MA 02138 United States