Progressive Estate Taxation
For an economy with altruistic parents facing productivity shocks, the optimal estate taxation is progressive: fortunate parents should face lower net returns on their inheritances. This progressivity reflects optimal mean reversion in consumption, which ensures that a long-run steady state exists with bounded inequality - avoiding immiseration.
Published: Farhi, Emmanuel and Ivan Werning. “Progressive Estate Taxation." Quarterly Journal of Economics 125, 2 (May 2010): 635-673..
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