Working Paper: NBER ID: w2735
Authors: Laurence J. Kotlikoff; Assaf Razin
Abstract: This paper examines the bequest\\gift behavior of altruistic parents who do not know their children's abilities and cannot observe their children's work effort. Parents are likely to respond to this information problem by making larger bequests to higher earning children and by using their transfers implicitly either to tax at the margin low earning children or to subsidize at the margin high earning children. These implicit tax rates may be quite large, despite the fact that total transfers are small. The paper suggests that labor supply studies should take into account potential implicit family taxation as wall as official government taxation. In addition, the fact that the family may play an implicit role in taxation means that there may be less need for the government to play such a role.
Keywords: bequests; taxation; altruism; intergenerational transfers
JEL Codes: H24; D31; D63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental bequests (D14) | Children's earnings (J13) |
| Children's earnings (J13) | Parental bequests (D14) |
| Higher-earning children (I24) | Larger transfers from parents (D15) |
| Lower-earning children (I24) | Smaller transfers from parents (D15) |
| Parental transfers (D15) | Implicit taxation on low-earning children (H29) |
| Parental transfers (D15) | Implicit subsidies for high-earning children (H23) |
| Children's ability and effort (I24) | Children's earnings (J13) |
| Parental bequests (D14) | Inequality in consumption among children (I24) |