Program > Papers by author > Franks Max

Monday 12
A7 - Macroeconomics, Growth I
Chair: Thomas Seegmuller
› 11:05 - 11:30 (25min)
› Auditorium - 2nd floor
Is Capital Back? The Role of Land Ownership and Savings Behavior.
Max Franks  1@  , David Klenert  2@  , Anselm Schultes  3@  , Kai Lessmann  3@  , Ottmar Edenhofer  3, 4, 5@  
1 : Potsdam Institute for Climate Impact Research  (PIK)  -  Website
Telegrafenberg A31, D-14412 Potsdam, Germany -  Germany
2 : Mercator Institute on Global Commons and Climate Change  (MCC)
3 : Potsdam Institute for Climate Impact Research  (PIK)  -  Website
P.O.Box 601203, 14412 Potsdam, Germany. -  Germany
4 : Technische Universität Berlin [Berlin]  (TUB)  -  Website
Straße des 17. Juni 135 10623 Berlin -  Germany
5 : Mercator Research Institute on Global Commons and Climate Change  (MCC)  -  Website
Torgauer Straße 12-15, D-10829 Berlin, Germany. -  Germany

Wealth inequality is a major political concern in most OECD countries. Under this premise we analyze different policy instruments in terms of their impact on wealth inequality and output. In a general equilibrium model, we disaggregate wealth in its capital and land components, and savings in their life-cycle and bequest components. Households are heterogeneous in their taste for leaving bequests. We show that governments have considerable freedom in reducing wealth inequality without sacrificing output: Land rent taxes enhance output due to a portfolio effect and reduce wealth inequality slightly. Bequest taxes have the highest potential to reduce inequality, and their effect on output is moderate. By contrast, we confirm the standard result that capital taxes reduce output strongly, and show that they only have moderate redistributive effects. Furthermore, we find that lump-sum recycling of tax revenue to young generations enhances output the most and further reduces wealth inequality.

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