["Australian Economic Papers, EarlyView. ", "\nABSTRACT\nThis study analyzes how a reduction in family business inheritance tax affects the wage gap between large firms and small and medium‐sized firms. Based on a general equilibrium model, this study is the first to analyze the relationship between family business inheritance tax and the indicated wage gap. Although previous studies address the relationship between general inheritance tax and wealth inequality, they are silent about this relationship. The calibrated results obtained using data from Korea show that a reduction in the family business inheritance tax rate for entrepreneurs of small and medium‐sized firms decreases the wage gap between these and large firms. Conversely, a reduction in the family business inheritance tax rate for entrepreneurs of large firms increases this wage gap.\n"]