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Can Inheritances Alleviate the Demographic Burden?
Author:
Mr. Erik Lueth
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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 097
Language:
English
Publication Date:
01 Aug 2001
DOI:
https://doi.org/10.5089/9781451852028.001
ISBN:
9781451852028
ISSN:
1018-5941
Pages:
27
Keywords:
WP; tax burden; utility function; Bequests; Taxation; computable GEM; factor income; offspring's net wage; price movement; budget constraint; pay-as-you-go scheme; opportunity cost; price effect; labor disincentive effect; capital income share; Labor supply; Demographic change; Tax allowances; Aging; Social assistance spending
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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With pay-as-you-go schemes in place, population aging will impose a heavy fiscal burden on young and future cohorts. However, these cohorts may also profit from larger inheritances as the number of heirs declines. The aim of this paper is to explore the compensating potential of private intergenerational transfers. A dynamic, computable general equilibrium model is employed allowing for a pay-as-you-go scheme, various bequest motives, and an endogenous labor supply. The findings are twofold. First, the increase in future generations' inheritances is insufficient to make up for the demographic burden. Second, increasing the inheritance tax during the demographic transition may alleviate the fiscal burden of future generations by improving overall efficiency.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund