Working Paper: CEPR ID: DP12873
Authors: Pietro Reichlin
Abstract: I discuss two alternative notions of social welfare (utilitarian and self-enforcing) in a dynastic model with heterogeneous and persistent degrees of parental altruism and evaluate the implied levels of consumption inequality. Then, I study a decentralization of planning optima in a competitive equilibrium where the only source of inequality arises from intergenerational wealth transmission and I show that the self-enforcing criterion implies a negative tax rate on the less altruistic individuals’ capital income.
Keywords: wealth inequality; capital taxation
JEL Codes: D31; E21; H21; J62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental altruism (D64) | Consumption inequality (D31) |
| Utilitarian social welfare (USW) (D69) | Consumption inequality (D31) |
| Self-enforcing social welfare (SESW) (D69) | Socially optimal distribution of resources (D30) |
| Self-enforcing social welfare (SESW) (D69) | Negative tax rate on capital income of less altruistic individuals (D64) |
| Consumption inequality (D31) | Wealth inequality (D31) |