Behavioral Responses to Inheritance Tax: Evidence from Notches in France, with Arturo Infante, submitted.
Abstract: For the first time, we exploit quasi-experimental variations to investigate the impact of inheritance taxation on wealth accumulation. Using the French preferential tax scheme for inheritance, we take advantage of unique age and time discontinuities to estimate different behavioral responses to taxation. These responses are estimated directly during lifetime, rather than relying solely on observations at death. The analysis is based on a longitudinal data set of preferential tax savings from Axa over the period 2003-2013.
We obtain two main results. First, we estimate timing responses using a bunching approach. Second, we use a difference-in-differences approach to estimate real and shifting among asset portfolio responses at the individual level. We document the presence of important, but relatively small, responses to inheritance taxation. Our empirical findings shed a new light upon wealth accumulation and bequest motives. Taken together, our results cannot be supported by the desire to retain control over wealth. We argue that small responses to inheritance tax could be better explained by psychological factors such as myopia or denial of death. Our results call for more sophisticated models incorporating psychological biases into wealth accumulation and bequest decision.
Accounting for Wealth Inequality Dynamics: Methods, Estimates and Simulations for France (1800-2014), with Bertrand Garbinti and Thomas Piketty, CEPR Discussion Paper 11848.
Abstract: This paper combines different sources and methods (income tax data, inheritance registers, national accounts, wealth surveys) in order to deliver consistent, unified wealth distribution series by percentiles for France over the 1800-2014 period, with detailed breakdowns by age, gender, income and assets over the 1970-2014 sub-period.
We find a large decline of the top 10% wealth share from the 1910s to the 1980s (from 80-90% of total wealth during the 19th century up until World War 1, down to 50-60% in the 1980s), mostly to the benefit of the middle 40% of the distribution (the bottom 50% wealth share is always less than 5%). Since the 1980s-90s, we observe a moderate rise of wealth concentration, with large fluctuations due to asset price movements. In effect, rising inequality in saving rates and rates of return pushes toward rising wealth concentration, in spite of the contradictory effect of housing prices.
We develop a simple simulation model highlighting how the combination of unequal saving rates, rates of return and labor earnings leads to large multiplicative effects and high steady-state wealth concentration. Small changes in the key parameters appear to matter a lot for long run inequality. We discuss the conditions under which rising concentration is likely to continue in the coming decades.
Income Inequality in France, 1900-2014: Evidence from Distributional National Accounts (DINA), with Bertrand Garbinti and Thomas Piketty
paper presents "Distributional National Accounts" (DINA) for France.
That is, we combine national accounts, tax and survey data in a
comprehensive and consistent manner to build homogenous annual series on
the distribution of national income by percentiles over the 1900-2014
period, with detailed breakdown by age, gender and income categories
over the 1970-2014 period.
Articles in French:
Combien ont coûté les réformes de l’impôt sur les successions mises en place en France depuis 2000 ?, [Inheritance tax reforms in France: How much did they cost since 2000?], Revue économique, 2016, 67(4), p. 913-936.