Essays on the Role of Inter Vivos Giving in General Equilibrium
Open AccessThis dissertation aims to develop a robust tool of detecting the characteristics of delinquent households and a public policy reform of boosting inter vivos giving before households experiencing a liquidity-constraint. In the first chapter, I develop an empirical pre-screening model to examine the pattern of a liquidity crunch among delinquent consumers. According to this nonparametric estimation, low-income, young households are found to have a high probability of filing for bankruptcy because they have a lack of liquidity while bearing a considerable amount of debts relative to income. As a discussion on the relevant tax policy reform, I elaborate the welfare aspects of inter vivos giving, often observed as liquidity injection to the young's budget, in dynamic general equilibrium. When a borrowing constraint arises from a non-negativity constraint on wealth, the model economy is able to produce the age-wealth distribution comparable to the corresponding distribution in the US economy while emphasizing the role of a gift in relaxing the binding constraints. The model supports a reform of lowering the gift tax rates by showing Pareto-improvement in the long run with higher average consumption, and a smoother lifetime consumption path. The greatest gain goes to the youngest generation, and this gain remains with the flexible choice of labor supply. If one's goal is to realize the efficiency gain, the dissertation suggests that the current tax system deserves another consideration from the steady-state point of view because the opportunity cost is smaller than the marginal gain from transferring a part of resources to the young who has high marginal propensity to save although an individual decreases the labor supply when young instead of increasing it while middle-aged.
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