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Post mortem reputation, compensatory gifts and equal bequests

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  • Lundholm, Michael
  • Ohlsson, Henry

Abstract

The empirical evidence suggests that parents use inter vivos gifts (i.e., transfers of tangible and financial property) to compensate less well off children whereas post mortem bequests are divided equally among siblings. We study a theoretical model assuming, first, that the amounts given is private information, only known to the donor ant the donee, while the amounts bequeathed is public information. Second, we assume that parents care about the reputation that their bequest behavior will leave them after their death. More specifically, this reputation is deteriorating in the difference in amounts inherited. We show that, given these assumptions, the optimal choice of altruistic parents is compensatory gifts and equal bequests.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 68 (2000)
Issue (Month): 2 (August)
Pages: 165-171

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Handle: RePEc:eee:ecolet:v:68:y:2000:i:2:p:165-171

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  1. Wilhelm, Mark O, 1996. "Bequest Behavior and the Effect of Heirs' Earnings: Testing the Altruistic Model of Bequests," American Economic Review, American Economic Association, vol. 86(4), pages 874-92, September.
  2. Oded Stark, 1988. "Equal Bequests and Parental Altruism: Compatibility or Orthogonality?," Departmental Working Papers _089, Chinese University of Hong Kong, Department of Economics.
  3. Laitner, John, 1993. "Intergenerational and interhousehold economic links," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 5, pages 189-238 Elsevier.
  4. Helmuth Cremer & Pierre Pestieau, 1996. "Bequests as a heir "discipline device"," Journal of Population Economics, Springer, vol. 9(4), pages 405-414.
  5. Tomes, Nigel, 1981. "The Family, Inheritance, and the Intergenerational Transmission of Inequality," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 928-58, October.
  6. Dunn, Thomas A. & Phillips, John W., 1997. "The timing and division of parental transfers to children," Economics Letters, Elsevier, vol. 54(2), pages 135-137, February.
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