Birth, Death and Taxes, Issue 2953
This paper analyzes the effects of lump-sum tax policy in an overlapping generations model in which consumers have uncertain longevity. It extends previous analyses by considering the case in which private insurance arrangements are actuarially unfair. In addition, it considers the polar case of actuarially fair insurance and the polar case of no insurance. A general condition for debt neutrality is derived. This condition depends explicitly on the degree of actuarial unfairness in insurance and on the extent to which parents care about the utility of their children.
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Abel absence of annuities actuarially fair annuities adverse selection altruistic bequest motives altruistic consumers beginning of period birth rate Blanchard model Buiter Bureau of Economic condition for debt consumer survives consumers alive corner solution Corollary death rate debt neutrality holds Economic Research effects of tax equal to zero equation 17 Equivalence Theorem holds Exchange Rates finite horizons first-period tax Fischer Black government's budget constraint gross rate head tax Hysteresis Lagrange multipliers left hand side lump-sum tax policy National Bureau NBER overlapping generations model parameter parent in period parent survives perfect annuity market perfect capital markets policy has real positive value presence of actuarially productivity growth Proposition question of Ricardian rate is equal rate of disinherited rate of return real effects reduces contemporaneous consumption Ricardian Equivalence Theorem right hand side riskless bonds Sebastian Edwards side of 15a survives to period tax cut tax in period Totally differenti utility function Wijnbergen