Wealth taxation and economic growth

This paper investigates the effect of wealth taxation on economic growth using an endogenous growth model with the altruistic bequest motive. We introduce intragenerational productivity differentials of human capital formation, resulting in differences of growth rates among individuals. The economy is divided into two groups; those who leave bequests to physical capital investment and those who leave bequests to human capital investment. An increase in taxes on life cycle savings will reduce the intragenerational growth differences, while the effect of taxation on bequests, wage income, or consumption on intragenerational growth differences is ambiguous. (C) 2001 Elsevier Science B.V. All rights reserved.