Government intervention as a bequest substitute

Michael Strawczynski

doi:10.1016/0047-2727(94)90036-1

Government intervention as a bequest substitute

Michael Strawczynski^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

6 Scopus citations

Abstract

A subsequent generations model is used in order to characterize consumption allocation under the future generation's income uncertainty. Altruistic concerns towards future generations give rise to 'precautionary bequests' which act as a hedge on risk. It is shown that given a first-order correlation between mean future income and the present generation's income, government can provide a Pareto improvement through a tax-transfer policy with universal participation. This policy acts as a substitute for precautionary bequests. Distributional aspects of government tax-transfer policy are also discussed.

Original language	English
Pages (from-to)	477-495
Number of pages	19
Journal	Journal of Public Economics
Volume	53
Issue number	3
DOIs	https://doi.org/10.1016/0047-2727(94)90036-1
State	Published - Mar 1994

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AB - A subsequent generations model is used in order to characterize consumption allocation under the future generation's income uncertainty. Altruistic concerns towards future generations give rise to 'precautionary bequests' which act as a hedge on risk. It is shown that given a first-order correlation between mean future income and the present generation's income, government can provide a Pareto improvement through a tax-transfer policy with universal participation. This policy acts as a substitute for precautionary bequests. Distributional aspects of government tax-transfer policy are also discussed.

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Government intervention as a bequest substitute

Abstract

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