Document Type
Article
Author ORCID Identifier
Sepideh Raei https://orcid.org/0000-0003-3992-4545
Journal/Book Title/Conference
Mathematics
Volume
13
Issue
23
Publisher
MDPI AG
Publication Date
11-24-2025
Journal Article Version
Version of Record
First Page
1
Last Page
23
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.
Abstract
Motivated by the Generation-Skipping Transfer Tax (GSTT) in the United States, we examine how varying estate tax rates by the heir’s age affects welfare. Methodologically, we introduce a parsimonious constant elasticity of substitution (CES) bequest utility that is markedly more tractable than the altruistic specifications commonly used in the literature, delivering closed-form optimal rules and transparent parameterization. Using this new framework, we provide a proof of concept showing how transfers from older to younger generations can enhance equilibrium welfare in a dynamically efficient economy à la Samuelson (1975). We embed the tractable bequest utility in a two-period overlapping-generations model with age-dependent estate tax schedules. Numerical exercises—parameterized to the fact that estate tax revenue is small relative to labor income taxation—indicate that lowering the tax rate on bequests to younger heirs (grandchildren) relative to older heirs (adult children) raises the present value of lifetime resources and overall welfare, effectively reversing the logic of the current GSTT. The findings highlight a practical avenue for implementing a “reverse social security” transfer from old to young that can improve welfare in dynamically efficient economies.
Recommended Citation
Feigenbaum, J.; Findley, T.S.; Raei, S. Intergenerational Transfers in a Tractable Overlapping- Generations Setting. Mathematics 2025, 13, 3769. https://doi.org/10.3390/math13233769