A Becker–Tomes model with investment risk

Zhu, Shenghao

doi:10.1007/s00199-018-1103-2

Cited by 6 publications

(8 citation statements)

References 35 publications

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“…Two recent papers analyze the specific assumptions that lead to the equalizing effect of bequest taxes. Zhu (2018), for example, suggests that if in a model of stochastic labor efficiency bequests are motivated by the "warm glow" instead of the altruistic motive assumed by Becker and Tomes (1979) and Davies (1986), then bequest taxes have a progressive distributional effect. Further, also the assumption of stochasticity in capital income restores the regressive effect of bequests, and, hence, the progressivity of bequest taxes (Wan and Zhu, 2017).…”

Section: Discussionmentioning

confidence: 99%

Is capital back? The role of land ownership and savings behavior

Franks

Klenert

Schultes

et al. 2018

Int Tax Public Finance

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Wealth inequality is a major political concern in most OECD countries. Under this premise we analyze different policy instruments in terms of their impact on wealth inequality and output. In a general equilibrium model, we disaggregate wealth in its capital and land components, and savings in their life-cycle and bequest components. Households are heterogeneous in their taste for leaving bequests. We show that governments have considerable freedom in reducing wealth inequality without sacrificing output: Land rent taxes enhance output due to a portfolio effect and reduce wealth inequality slightly. Bequest taxes have the highest potential to reduce inequality, and their effect on output is moderate. By contrast, we confirm the standard result that capital taxes reduce output strongly, and show that they only have moderate redistributive effects. Furthermore, we find that using the tax proceeds for transfers to the young generations enhances output the most and further reduces wealth inequality.

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Section: Discussionmentioning

confidence: 99%

Is capital back? The role of land ownership and savings behavior

Franks

Klenert

Schultes

et al. 2018

Int Tax Public Finance

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“…The class of CRRA preferences described in Assumption 4 represents a cornerstone of theoretical and applied models in finance and macroeconomics, and have been extensively used for the analysis of wealth inequality, transitional dynamics and longrun distributions, see, among many others, Benhabib et al (2011), Benhabib et al (2015, Zhu (2019), Wan and Zhu (2019), Birkner et al (2023). While allowing for explicit characterizations of some of the objects of interest in our analysis (such as e.g.…”

Section: Preferencesmentioning

confidence: 99%

Left and right: a tale of two tails of the wealth distribution

D’Amato,

Di Pietro,

Sorge

2024

Econ Theory

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We study a model of wealth accumulation in altruistic lineages, in which households face uninsurable risk, investment indivisibilities and borrowing constraints. A thick upper tail of the stationary distribution of wealth is shown to emerge as a robust prediction, irrespective of (1) the presence of multidimensional (wealth and ability) heterogeneity and non-convexities in human capital formation, and (2) the nature of parental bequest motives (joy-of-giving vs. paternalism). Additionally, (3) we identify conditions under which the unique, ergodic wealth distribution exhibits a mass point at the bottom of its support, where credit market imperfections continue to affect, along the convergence process, the structure of wealth transitions at the lineage level. Motivated by these results, we then analyze the sensitivity of the left tail to various frictions and fiscal instruments that affect bequest strategies and the ensuing transmission of wealth across generations. In particular, capital income or bequest taxes with no redistribution may reinforce economic mechanisms underpinning mobility traps in the left tail, thereby increasing the persistence of households in the lowest tiers of the wealth distribution.

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“…Pareto and double-Pareto distributions Pareto distributions have become very popular recently (Piketty and Zucman 2015). They appeared in the analysis of top income changes (Saez and Zucman 2016), income growth per person, population growth Jones (2015), financial deregulation, (corporate) taxes (Cao and Luo 2017;Zhu 2019) or bequests and saving rate inequality (Benhabib et al 2019). Some models derive a 'double Pareto distribution' for wealth.…”

Section: Related Literaturementioning

confidence: 99%

The dynamics of Pareto distributed wealth in a small open economy

2022

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We study a small open economy with labor, capital accumulation, random death, taxation and a government budget balanced in the long run. We offer methods that provide ordinary differential equations for means and analytical expressions for densities. The latter is achieved by solving stochastic differential equations analytically and deriving the density from this solution. Starting from any distribution, the aggregate distribution converges, both on a transition path towards a steady state and on a transition path towards balanced growth, to a Pareto-distribution. We provide an intuitive economic interpretation for a stationary long-run density with an infinite mean in an economy on a balanced growth path. We also show how government tax policy can lead to non-monotonic links between the equilibrium growth rate of the economy and risk aversion of households.

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A Becker–Tomes model with investment risk

Cited by 6 publications

References 35 publications

Is capital back? The role of land ownership and savings behavior

Is capital back? The role of land ownership and savings behavior

Left and right: a tale of two tails of the wealth distribution

The dynamics of Pareto distributed wealth in a small open economy

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