Taxation and wealth transmission in France

This paper studies inter-vivos transfers and bequests in France and their relation to the French inheritance law and taxation using administrative records and a national households survey. Transmission behavior is highly responsive to changes in the fiscal system: inter-vivos gifts increased after a 1992 law made them partly tax-free. Moreover, the probability of giving to children is greater (ceteris paribus) if parents' wealth is taxable. For children, the probability of receiving a gift over the life cycle increases with their permanent income. The amount received increases with current income. It increases or bears no relation to permanent income, depending on the specification. Thus we find no direct support for the altruistic nor for the exchange motive. These results are compatible with a model where parents transfer to the best endowed child. (C) 2001 Elsevier Science B.V. All rights reserved.