Intergenerational Income Mobility and Income Taxation

44 Pages Posted: 7 Apr 2019

See all articles by Musab Kurnaz

Musab Kurnaz

University of North Carolina at Charlotte - The Belk College of Business Administration - Department of Economics

Mehmet Soytas

Ozyegin University; Center for Economics and Econometrics; Global Labor Organization

Date Written: March 9, 2019

Abstract

We study the impact of income taxation on intergenerational income correlation. We estimate a life cycle dynastic model and conduct counterfactual analysis to observe the effects of various tax regimes. Compared to a no tax environment, a flat tax regime reduces the correlation only by one percentage points. If the flat tax regime provides child benefits, the correlation additionally declines by four percentage points. Finally, if the taxes are progressive, the reduction, which is due to the increase in the fertility rate (quantity) and the decrease in the educational outcome of children (quality), is highly significant (seven percentage points).

Keywords: Dynastic Models, Discrete Choice, Fertility, Income Taxation

JEL Classification: H24, J13, J22, J62

Suggested Citation

Kurnaz, Musab and Soytas, Mehmet, Intergenerational Income Mobility and Income Taxation (March 9, 2019). Available at SSRN: https://ssrn.com/abstract=3352731 or http://dx.doi.org/10.2139/ssrn.3352731

Musab Kurnaz (Contact Author)

University of North Carolina at Charlotte - The Belk College of Business Administration - Department of Economics ( email )

Charlotte, NC 28223
United States

HOME PAGE: http://https://sites.google.com/view/musabkurnaz

Mehmet Soytas

Ozyegin University ( email )

Kusbakisi Cd. No: 2
Altunizade, Uskudar
Istanbul, 34662
Turkey
+90 216 5649438 (Phone)

HOME PAGE: http://https://faculty.ozyegin.edu.tr/mehmetas

Center for Economics and Econometrics ( email )

Bogazici Universitesi
Bebek
Istanbul, 34342
Turkey

HOME PAGE: http://https://cee.boun.edu.tr/content/mehmet-ali-soyta%C5%9F

Global Labor Organization ( email )

Collogne
Germany

HOME PAGE: http://https://glabor.org/user/mehmets/

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