Progressive Estate Taxation

39 Pages Posted: 20 Nov 2006 Last revised: 7 Mar 2007

See all articles by Emmanuel Farhi

Emmanuel Farhi

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

Iván Werning

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: October 2006

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.

Suggested Citation

Farhi, Emmanuel and Werning, Ivan, Progressive Estate Taxation (October 2006). NBER Working Paper No. w12600, Available at SSRN: https://ssrn.com/abstract=937301

Emmanuel Farhi

Harvard University - Department of Economics ( email )

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Ivan Werning (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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HOME PAGE: http://econ-www.mit.edu/faculty/iwerning

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