(CREM, Université de Rennes)

 

 

Abstract: This paper examines the role of land in wealth dynamics and taxation policy by focusing on the interplay among agents’ bidding for location, mortgage market imperfections, and inheritance. We develop a model in which altruistic agents leave to their heir a voluntary bequest and their housing property, the value of which is determined by the residential equilibrium. We first show that the borrowing constraint in the mortgage market is a source of symmetry-breaking, leading an initially homogeneous population to reside in different locations and to split into different wealth classes. When the wealth distribution is heterogeneous, the borrowing constraint generates spatial wealth sorting, which translates into persistent inequality: Wealthier agents reside in the most attractive locations and leave a higher inheritance, while the poorest dynasties are relegated in poverty trap areas. We also derive an optimal tax schedule that combines a tax on the land share in the value of inherited housing assets and on lifetime wealth, allowing an efficient financing of public expenditures, a better allocation of resources between land purchases and productive investments, and lower wealth inequality.

 

– Séminaire organisé par le programme 3 / BSE –