DP12873 Socially Optimal Wealth Inequality
|Publication Date:||April 2018|
|Keyword(s):||Capital taxation, inequality, Wealth|
|JEL(s):||D31, E21, H21, J62|
|Programme Areas:||Public Economics, Macroeconomics and Growth|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=12873|
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.