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Fiscal policy with agents differing in altruism and ability

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  • MICHEL, Philippe
  • PESTIEAU, Pierre

Abstract

This paper presents an overlapping generations model of growth with individuals differing 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. We then look at the macroeconomic and distributive effects of three fiscal policies: public debt, pay-as-you-go social security and estate taxation. Under plausible assumption we show that both public debt and social security are neutral A la Ricardo but increase inequality. We also show that a estate taxation can be Pareto worsening even though it can foster income equality.
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Suggested Citation

  • MICHEL, Philippe & PESTIEAU, Pierre, 2005. "Fiscal policy with agents differing in altruism and ability," LIDAM Reprints CORE 1825, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1825
    Note: In : Economica, 72, 121-135, 2005
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    References listed on IDEAS

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    1. N. Gregory Mankiw, 2000. "The Savers-Spenders Theory of Fiscal Policy," American Economic Review, American Economic Association, vol. 90(2), pages 120-125, May.
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    5. Philippe Weil, 1987. "Love Thy Children," SciencePo Working papers Main hal-03393237, HAL.
    6. Philippe Michel & Pierre Pestieau, 1998. "Fiscal Policy in a Growth Model with Both Altruistic and Nonaltruistic Agents," Southern Economic Journal, John Wiley & Sons, vol. 64(3), pages 682-697, January.
    7. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66(6), pages 467-467.
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    11. Ita Falk & Oded Stark, 2001. "Dynasties and Destiny: On the Roles of Altruism and Impatience in the Evolution of Consumption and Bequests," Economica, London School of Economics and Political Science, vol. 68(272), pages 505-518, November.
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    13. Robert A. Becker, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(2), pages 375-382.
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    Cited by:

    1. Borissov, Kirill & Kalk, Andrei, 2020. "Public debt, positional concerns, and wealth inequality," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 96-111.
    2. Helmuth Cremer & Pierre Pestieau, 2011. "The Tax Treatment of Intergenerational Wealth Transfers ," CESifo Economic Studies, CESifo Group, vol. 57(2), pages 365-401, June.
    3. Helmuth Cremer & ) & Pierre Pestieau, 2003. "Wealth Transfer Taxation: A Survey," Public Economics 0311003, University Library of Munich, Germany.
    4. Belan Pascal & Moussault Erwan, 2020. "Inheritance Taxation in a Model with Intergenerational Time Transfers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-19, January.
    5. Emmanuel Thibault, 2017. "Is GDP a Relevant Social Welfare Indicator? A Savers—Spenders Theory Approach," The Japanese Economic Review, Springer, vol. 68(3), pages 333-351, September.
    6. Emin Gahramanov & Xueli Tang, 2013. "Should We Refinance Unfunded Social Security?," Economica, London School of Economics and Political Science, vol. 80(319), pages 532-565, July.
    7. Momota, Akira, 2016. "Intensive and extensive margins of fertility, capital accumulation, and economic welfare," Journal of Public Economics, Elsevier, vol. 133(C), pages 90-110.
    8. Max Franks & Ottmar Edenhofer, 2020. "Optimal Redistributive Wealth Taxation When Wealth Is More Than Just Capital," CESifo Working Paper Series 8093, CESifo.

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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