Macroeconomic effects of family business inheritance tax reduction: Evidence from South Korea

This study examines the macroeconomic effects of family business inheritance tax reduction in South Korea using a theoretical model that addresses the problem of a family member's occupational choice decision between being a worker and being an entrepreneur. In contrast with previous studies, the model considers the distribution of firm size. The effect of the reduction in the family business inheritance tax rate on the macroeconomy is positive in this model, whereas it is negative in a model in the literature that does not consider the distribution of firm size when addressing the occupational choice decision. Calibrated results obtained using data for South Korea show that a 50% reduction in the family business inheritance tax rate increases the total labour demand, total real investment, and total sales by 0.13%, 1.88%, and 0.15%, respectively.     

Assessing skewness in financial markets

It is a matter of common observation that investors value substantial gains but are averse to heavy losses. Obvious as it may sound, this translates into an interesting preference for right-skewed return distributions, whose right tails are heavier than their left tails. Skewness is thus not only a way to describe the shape of a distribution, but also a tool for risk measurement. We review the statistical literature on skewness and provide a comprehensive framework for its assessment. Then, we present a new measure of skewness, based on the decomposition of variance in its upward and downward components. We argue that this measure fills a gap in the literature and show in a simulation study that it strikes a good balance between robustness and sensitivity.