Estate Taxation, Entrepreneurship, and Wealth

Marco Cagetti · Mariacristina De Nardi

180 citations0/0 files storedAmerican Economic Review

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Economic and Fiscal Studies Corporate Taxation and Avoidance Fiscal Policy and Economic Growth

Abstract

This paper studies the estate tax in a quantitative framework with business investment, borrowing constraints, estate transmission, and wealth inequality. We find that the estate tax has little effect on the saving and investment decisions of small businesses, but does distort the decisions of larger firms, thereby reducing aggregate output and savings. Removing such distortions by eliminating the estate tax does not necessarily imply that everyone would be better off. If other taxes were raised to reestablish fiscal balance, those at the top of the wealth distribution would experience a large welfare gain, but most of the population would lose. (JEL D31, E21, H2)

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References

1978On the Size Distribution of Business Firms 1985Debt, Deficits, and Finite Horizons 2002Getting Income Shares Right 2006Entrepreneurship, Frictions, and Wealth 1991Quadrature-Based Methods for Obtaining Approximate Solutions to Nonlinear Asset Pricing Models 1993Debt-Constrained Asset Markets 2003Accounting for the U.S. Earnings and Wealth Inequality 2000Entrepreneurship, Saving, and Social Mobility

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