Making Bequests Without Spoiling Children: Bequests as an Implicit Optimal Tax Structure and the Possibility That Altruistic Bequests are not Equaliz / Laurence J. Kotlikoff, Assaf Razin.

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Kotlikoff, Laurence J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w2735.Publication details: Cambridge, Mass. National Bureau of Economic Research 1988.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: This paper examines the bequest\gift behavior of altruistic parents who do not know their children's abilities and cannot observe their children's work effort. Parents are likely to respond to this information problem by making larger bequests to higher earning children and by using their transfers implicitly either to tax at the margin low earning children or to subsidize at the margin high earning children. These implicit tax rates may be quite large, despite the fact that total transfers are small. The paper suggests that labor supply studies should take into account potential implicit family taxation as wall as official government taxation. In addition, the fact that the family may play an implicit role in taxation means that there may be less need for the government to play such a role.

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Previous	nber w27347 Deciphering the Macroeconomic Effects of Internal Devaluations in a Monetary Union /	nber w27348 Why Does Consumption Fluctuate in Old Age and How Should the Government Insure It? /	nber w27349 How and When to Use the Political Cycle to Identify Advertising Effects /	nber w2735 Making Bequests Without Spoiling Children: Bequests as an Implicit Optimal Tax Structure and the Possibility That Altruistic Bequests are not Equaliz /	nber w27350 Global Trade and Margins of Productivity in Agriculture /	nber w27351 Universal Basic Income: A Dynamic Assessment /	nber w27352 Inflation with Covid Consumption Baskets /	Next

October 1988.

This paper examines the bequest\gift behavior of altruistic parents who do not know their children's abilities and cannot observe their children's work effort. Parents are likely to respond to this information problem by making larger bequests to higher earning children and by using their transfers implicitly either to tax at the margin low earning children or to subsidize at the margin high earning children. These implicit tax rates may be quite large, despite the fact that total transfers are small. The paper suggests that labor supply studies should take into account potential implicit family taxation as wall as official government taxation. In addition, the fact that the family may play an implicit role in taxation means that there may be less need for the government to play such a role.