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Aspirations, Habit Formation, and Bequest Motive

Author

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  • Jaime Alonso-Carrera
  • Jordi Caballé
  • Xavier Raurich

Abstract

We consider an economy where individuals use their standard of living based on past consumption in order to evaluate the utility arising from current consumption. We analyse how this process of preference formation affects the bequest motive. We show that habits (based on one's own past consumption) reduce the willingness of individuals to leave bequests, while aspirations (based on the standard of living of parents) make the existence of positive bequests easier. The long-run effects of both habits and aspirations on capital stock and on the amount of bequests depend on whether or not the bequest motive is operative. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Suggested Citation

  • Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2007. "Aspirations, Habit Formation, and Bequest Motive," Economic Journal, Royal Economic Society, vol. 117(520), pages 813-836, April.
    • Handle: RePEc:ecj:econjl:v:117:y:2007:i:520:p:813-836
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    Citations

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    Cited by:

    1. Emmanuelle Augeraud-Veron & Mauro Bambi, 2012. "Does habit formation always increase the agents' desire to smooth consumption?," Discussion Papers 12/12, Department of Economics, University of York.
    2. Schäfer, Andreas & Valente, Simone, 2011. "Habit Formation, Dynastic Altruism, And Population Dynamics," Macroeconomic Dynamics, Cambridge University Press, vol. 15(3), pages 365-397, June.
    3. Jordi Caballé & Ana I. Moro Egido, 2008. "The Effect of Aspirations, Habits, and Social Security on the Distribution of Wealth," ThE Papers 08/02, Department of Economic Theory and Economic History of the University of Granada..
    4. Luca Gori & Mauro Sodini, 2014. "Indeterminacy and nonlinear dynamics in an OLG growth model with endogenous labour supply and inherited tastes," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 37(1), pages 159-179, April.
    5. Barnett, Richard C. & Bhattacharya, Joydeep, 2008. "Rejuveniles and growth," European Economic Review, Elsevier, vol. 52(6), pages 1055-1071, August.
    6. Allen, Jeffrey & Chakraborty, Shankha, 2022. "Inequality and the Ability to Aspire," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 264-283.
    7. Alonso-Carrera, Jaime & Caballé, Jordi & Raurich, Xavier, 2008. "Estate taxes, consumption externalities, and altruism," Journal of Public Economics, Elsevier, vol. 92(7), pages 1751-1764, July.
    8. Allen, Jeffrey & Chakraborty, Shankha, 2018. "Aspirations, health and the cost of inequality," Journal of Economic Dynamics and Control, Elsevier, vol. 86(C), pages 144-164.
    9. Garance Genicot & Debraj Ray, 2017. "Aspirations and Inequality," Econometrica, Econometric Society, vol. 85, pages 489-519, March.
    10. Francisco Alvarez-Cuadrado & Jose Maria Casado & Jose Maria Labeaga, 2016. "Envy and Habits: Panel Data Estimates of Interdependent Preferences," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(4), pages 443-469, August.
    11. Luciano Fanti & Luca Gori & Cristiana Mammana & Elisabetta Michetti, 2018. "A model of growth with inherited tastes," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 41(2), pages 163-186, November.
    12. Caballé, Jordi & Moro-Egido, Ana I., 2021. "Do aspirations reduce differences in wealth accumulation?," Economic Modelling, Elsevier, vol. 102(C).
    13. Luciano, Fanti & Luca, Gori & Cristiana, Mammana & Elisabetta, Michetti, 2016. "Complex dynamics in an OLG model of growth with inherited tastes," MPRA Paper 69906, University Library of Munich, Germany.
    14. Angelini, Viola, 2009. "Consumption and habit formation when time horizon is finite," Economics Letters, Elsevier, vol. 103(2), pages 113-116, May.
    15. Kojun Hamada & Tsuyoshi Shinozaki & Mitsuyoshi Yanagihara, 2017. "Aspirations and the transfer paradox in an overlapping generations model," Journal of Economics, Springer, vol. 122(3), pages 279-301, November.
    16. Carlos Vargas-Silva, 2009. "Crime and Remittance Transfers," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 35(2), pages 232-247.
    17. Bouché, Stéphane & de Miguel, Carlos, 2019. "Endogenous aspirations, growth and the rise of environmental concerns," Energy Economics, Elsevier, vol. 84(S1).
    18. Valente, Simone, 2011. "Habit formation and resource dependence in dynastic economies," Mathematical Social Sciences, Elsevier, vol. 61(3), pages 131-145, May.
    19. Jordi Caballé & Ana I. Moro-Egido, 2015. "On the Accumulation of Wealth under Aspirations," Working Papers 826, Barcelona School of Economics.
    20. Luciano Fanti, 2012. "Habits, aspirations and endogenous fertility," Discussion Papers 2012/142, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    21. Ana I. Moro Egido, 2021. "Social Comparisons; the behavioural component," ThE Papers 21/04, Department of Economic Theory and Economic History of the University of Granada..
    22. Marco Bertoni & Luca Corazzini, 2018. "Asymmetric affective forecasting errors and their correlation with subjective well-being," PLOS ONE, Public Library of Science, vol. 13(3), pages 1-22, March.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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