NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Progressive Estate Taxation

Emmanuel Farhi, Ivan Werning

NBER Working Paper No. 12600*
Issued in October 2006
NBER Program(s):   EFG    PE

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.

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