Does Neutrality Emerge in Modified Joy-of-Giving Bequest Motive?
This paper examines long-run economic and welfare effects of the following two public intergenerational transfer policies in an overlapping generations model, with modified joy-of-giving bequest motives: a counter-unfunded pension system for the young financed by inheritance taxes, and an unfunded pension system financed by bequest acquisition taxes.
We show that the long-run capital stock and utility are not affected by an increase in the inheritance tax, while only the long-run bequest is decreased when a counterunfunded pension system for the young is implemented. Moreover, we also show that the long-run capital stock and utility are not affected by an increase in the bequest acquisition tax, while only the long-run bequest is increased when an unfunded pension system is implemented. In the context of Barro’s neutrality theorem based on Barro(1974), an unfunded pension policy becomes a neutral public intergenerational transfer policy for capital stock and utility. We examine whether such a kind of neutrality emerges in our model or not.
Are the two public intergenerational transfer policies in this paper meaningful for the economy? What is the main role of the two public intergenerational transfer policies under modified joy-of-giving bequest motives? What is the difference between the inheritance tax and the bequest acquisition tax in the context of the two public intergenerational transfer policies in this paper? What is the main role of the central government under our analysis? Does neutrality emerge under our modified bequest motives or not? We also answer these questions in discussing the implications of the two public intergenerational transfer policies.
Key wordsModified Joy-of-Giving Bequest Motive Public Intergenerational Transfer Policies Neutrality in the Modified Joy-of-Giving Bequest Motive
JEL ClassificationD91 H22 H55
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An earlier version of this paper was presented at The 12th JEPA International Conference at Sapporo University, Hokkaido, Japan. I thank Professors Akira Yokoyama of Chuo University and Masaya Yasuoka of Kwansei Gakuin University for helpful comments on an earlier version of this paper. I also thank two anonymous referees of this journal for beneficial and constructive comments on revising this paper drastically. However all remaining erros are my sole responsibility.
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