Bequests, taxation and the distribution ofwealth in a general equilibrium model

This paper examines the role of bequests and of taxation on bequests for the distributionof wealth. We investigate a model with overlapping generations and heterogenoushouseholds where parents derive utility directly from their bequests. We obtain allresults analytically. Using the coefficient of variation as the measure of inequality,bequests per se diminish the inequality of wealth since they raise private savings andhence average wealth holdings more than the variance of wealth. From a policy perspective,taxing bequests and redistributing government revenue lump-sum among theyoung generation further decreases wealth inequality.