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A Dynamic Model of Redistribution, Inheritance, and Inequality

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  • James B. Davies
  • Peter J. Kuhn

Abstract

Comparing steady states of an overlapping-generations economy, Gary S. Becker and Nigel Tomes (1979) and James B. Davies (1986) have noted that redistributive taxation can be disequalizing. This paper solves for the full transition path of inequality after a redistributive tax increase. The authors find, in contrast to the steady-state results, that redistribution "works' in the first generation under quite general conditions, even when fully anticipated by all previous generations. Further, inequality is likely to fall for several generations before approaching its new steady-state level from below.

Suggested Citation

  • James B. Davies & Peter J. Kuhn, 1991. "A Dynamic Model of Redistribution, Inheritance, and Inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 324-344, May.
    • Handle: RePEc:cje:issued:v:24:y:1991:i:2:p:324-44
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    Cited by:

    1. Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2018. "Inheritance and wealth inequality: Evidence from population registers," Journal of Public Economics, Elsevier, vol. 165(C), pages 17-30.
    2. Wan, Jing & Zhu, Shenghao, 2012. "Intergenerational links, taxation, and wealth distribution," MPRA Paper 39511, University Library of Munich, Germany.
    3. C. Simon Fan, 2006. "Do the Rich Save More? A New View Based on Intergenerational Transfers," Southern Economic Journal, John Wiley & Sons, vol. 73(2), pages 362-373, October.
    4. Jagadeesh Gokhale & Laurence J. Kotlikoff, 2002. "The Impact of Social Security and Other Factors on the Distribution of Wealth," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 85-114, National Bureau of Economic Research, Inc.
    5. Hans Grüner, 1995. "Redistributive policy, inequality and growth," Journal of Economics, Springer, vol. 62(1), pages 1-23, February.
    6. Jing Wan & Shenghao Zhu, 2019. "Bequests, estate taxes, and wealth distributions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(1), pages 179-210, February.
    7. Johann K. Brunner & Susanne Pech, 2008. "Optimum taxation of inheritances," Economics working papers 2008-06, Department of Economics, Johannes Kepler University Linz, Austria.
    8. Bossmann, Martin & Kleiber, Christian & Walde, Klaus, 2007. "Bequests, taxation and the distribution of wealth in a general equilibrium model," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1247-1271, August.
    9. Grüner, Hans Peter, 1994. "Redistributive policy, inequality and growth," Discussion Papers, Series II 240, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    10. Gokhale, Jagadeesh & Kotlikoff, Laurence J. & Sefton, James & Weale, Martin, 2001. "Simulating the transmission of wealth inequality via bequests," Journal of Public Economics, Elsevier, vol. 79(1), pages 93-128, January.
    11. Brunner Johann K., 2014. "Die Erbschaftsteuer – Bestandteil eines optimalen Steuersystems?," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 15(3), pages 199-218, October.
    12. Audi, Marc & Ali, Amjad, 2016. "Socio-Economic Status and Life Expectancy in Lebanon: An Empirical Analysis," MPRA Paper 72900, University Library of Munich, Germany.

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