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Title: Socially Optimal Wealth Inequality

Author(s): Pietro Reichlin

Publication Date: April 2018

Keyword(s): Capital taxation, inequality and Wealth

Programme Area(s): Macroeconomics and Growth and Public Economics

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.

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Bibliographic Reference

Reichlin, P. 2018. 'Socially Optimal Wealth Inequality'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12873