Accidental Bequests: A Curse for the Rich and a Boon for the Poor

Helmuth Cremer, Firouz Gahvari, Pierre Pestieau

Research output: Contribution to journalArticlepeer-review

Abstract

When accidental bequests signal otherwise unobservable individual characteristics, such as productivity and longevity, the population should be partitioned into two groups: those who do not receive an inheritance and those who do. The first tagged group receives a Mirrlees second-best tax schedule; the second group, when its type is fully revealed, faces a first-best tax schedule. Receiving an inheritance makes high-ability types worse off and low-ability types better off. High-ability individuals face a bequest tax of more than 100 percent, while low-ability types face a bequest tax that can be smaller, as well as larger, than 100 percent, and it might even be negative.

Original languageEnglish (US)
Pages (from-to)1437-1459
Number of pages23
JournalScandinavian Journal of Economics
Volume114
Issue number4
DOIs
StatePublished - Dec 2012

Keywords

  • Accidental bequests
  • Estate tax
  • First-best
  • Second-best
  • Tagging

ASJC Scopus subject areas

  • Economics and Econometrics

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