Working Paper: CEPR ID: DP4254
Authors: Philippe Michel; Pierre Pestieau
Abstract: This Paper explores the effects of a menu of inter-generational fiscal policies (public debt financed by taxes, PAYG social security system and inheritance taxation) in an overlapping generations model with perfect altruism. It generalizes the model by Barro (1974) by introducing intra-generational heterogeneity. In other words, households differ in productivity and altruism. Within such a model wealth is entirely held in the steady-state by the families with the highest degree of altruism. Under plausible assumptions both public debt and social security are neutral à la Ricardo, while increasing inequality. Also, estate taxation can be Pareto worsening even though it fosters income equality.
Keywords: altruism; estate tax; public debt; social security
JEL Codes: D64; E62; H20; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Public debt and PAYG social security (H55) | income disparity (D31) |
| Public debt and PAYG social security (H55) | welfare of constrained households (I30) |
| Estate taxation (H24) | utility of lower productivity agents (D24) |
| Fiscal policies (H39) | income disparity (D31) |
| Estate taxation (H24) | overall wealth inequality (D31) |