Department of Economics
University of Copenhagen
Institutional Affiliation: University of Copenhagen
NBER Working Papers and Publications
|March 2018||Wealth Taxation and Wealth Accumulation: Theory and Evidence from Denmark|
with Kristian Jakobsen, Henrik Kleven, Gabriel Zucman: w24371
Using administrative wealth records from Denmark, we study the effects of wealth taxes on wealth accumulation. Denmark used to impose one of the world’s highest marginal tax rates on wealth, but this tax was drastically reduced and ultimately abolished between 1989 and 1997. Due to the specific design of the wealth tax, these changes provide a compelling quasi-experiment for understanding behavioral responses among the wealthiest segments of the population. We find clear reduced-form effects of wealth taxes in the short and medium run, with larger effects on the very wealthy than on the moderately wealthy. We develop a simple lifecycle model with utility of residual wealth (bequests) allowing us to interpret the evidence in terms of structural primitives. We calibrate the model to the quas...