Can Inheritances Alleviate the Demographic Burden?

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 intergenerat...

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Bibliographic Details
Main Author: Lueth, Erik
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2001
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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653 |a Social assistance spending 
653 |a Expenditures, Public 
653 |a Income tax 
653 |a Income economics 
653 |a Labor market 
653 |a Expenditure 
653 |a Demographic change 
653 |a Labor supply 
653 |a Non-labor Market Discrimination 
653 |a Labour 
653 |a Demographic Trends, Macroeconomic Effects, and Forecasts 
653 |a National Government Expenditures and Welfare Programs 
653 |a Demand and Supply of Labor: General 
653 |a Demographic transition 
653 |a Population aging 
653 |a Economics of the Handicapped 
653 |a Personal Income and Other Nonbusiness Taxes and Subsidies 
653 |a Population and demographics 
653 |a Demography 
653 |a Fiscal Policy 
653 |a Tax allowances 
653 |a Computable and Other Applied General Equilibrium Models 
653 |a Labor 
653 |a Population & demography 
653 |a Economics of the Elderly 
653 |a Public Finance 
653 |a Aging 
653 |a Social Security and Public Pensions 
653 |a Taxes 
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520 |a 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