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Bequests, Inter Vivos Transfers, and Wealth Distribution

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  • Shinichi Nishiyama

    (Congressional Budget Office)

Abstract

This paper constructs a heterogeneous agent overlapping generations model with bequests and inter vivos transfers. In the model, households in the same family line behave strategically to determine their consumption, working hours, gifts, and savings. Calibrating the model to the U.S. economy, the paper measures time preference and parental altruism consistent with the economy's capital-output ratio and the size of intergenerational transfers. The model with intergenerational transfers better explains, although not fully, the wealth distribution of the United States. The paper also analyzes the effects of government policy changes on wealth accumulation, distribution, and social welfare. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.2002.0185
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 5 (2002)
Issue (Month): 4 (October)
Pages: 892-931

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Handle: RePEc:red:issued:v:5:y:2002:i:4:p:892-931

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Related research

Keywords: intergenerational altruism; overlapping generations; Markov perfect equilibrium;

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References

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  1. S. Rao Aiyagari & Jeremy Greenwood & Anath Seshardi, 2001. "Efficient investment in children," Working Paper, Federal Reserve Bank of Cleveland 0105, Federal Reserve Bank of Cleveland.
  2. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986. "The Strategic Bequest Motive," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 4(3), pages S151-82, July.
  3. Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2003. "A welfare analysis of social security in a dynastic framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1247-1274, November.
  4. W. G. Gale & J. K. Scholz, . "Intergenerational transfers and the accumulation of wealth," Institute for Research on Poverty Discussion Papers, University of Wisconsin Institute for Research on Poverty 1019-93, University of Wisconsin Institute for Research on Poverty.
  5. Wilhelm, Mark O, 1996. "Bequest Behavior and the Effect of Heirs' Earnings: Testing the Altruistic Model of Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 874-92, September.
  6. Gouveia, Miguel & Strauss, Robert P., 1994. "Effective Federal Individual Tax Functions: An Exploratory Empirical Analysis," National Tax Journal, National Tax Association, vol. 47(2), pages 317-39, June.
  7. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, American Economic Association, vol. 82(3), pages 409-29, June.
  8. Joel Slemrod & Wojciech Kopczuk, 2000. "The Impact of the Estate Tax on the Wealth Accumulation and Avoidance Behavior of Donors," NBER Working Papers 7960, National Bureau of Economic Research, Inc.
  9. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(6), pages 1121-66, December.
  10. Burbidge, John B, 1983. "Government Debt in an Overlapping-Generations Model with Bequests and Gifts," American Economic Review, American Economic Association, American Economic Association, vol. 73(1), pages 222-27, March.
  11. Lord, William & Rangazas, Peter, 1991. "Savings and Wealth in Models with Altruistic Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 81(1), pages 289-96, March.
  12. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, American Economic Association, vol. 82(3), pages 393-408, June.
  13. Shinichi Nishiyama, 2000. "Measuring Time Preference and Parental Altruism: Technical Paper 2000-7," Working Papers, Congressional Budget Office 13333, Congressional Budget Office.
  14. John Laitner, 2001. "Wealth Accumulation in the U.S.: Do Inheritances and Bequests Play a Significant Role?," Working Papers, University of Michigan, Michigan Retirement Research Center wp019, University of Michigan, Michigan Retirement Research Center.
  15. Bruce, Neil & Waldman, Michael, 1990. "The Rotten-Kid Theorem Meets the Samaritan's Dilemma," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(1), pages 155-65, February.
  16. Shinichi Nishiyama & Kent Smetters, 2002. "Ricardian Equivalence with Incomplete Household Risk Sharing," NBER Working Papers 8851, National Bureau of Economic Research, Inc.
  17. Huggett, Mark, 1996. "Wealth distribution in life-cycle economies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 38(3), pages 469-494, December.
  18. von Furstenberg, George M, 1980. "Private Saving," American Economic Review, American Economic Association, American Economic Association, vol. 70(2), pages 177-81, May.
  19. B. Douglas Bernheim, 1992. "How Strong are Bequest Motives? Evidence Based on Estimates of the Demand for Life Insurance and Annuities," NBER Working Papers 2942, National Bureau of Economic Research, Inc.
  20. Menchik, Paul L & David, Martin, 1983. "Income Distribution, Lifetime Savings, and Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 672-90, September.
  21. Carmichael, Jeffrey, 1982. "On Barro's Theorem of Debt Neutrality: The Irrelevance of Net Wealth," American Economic Review, American Economic Association, American Economic Association, vol. 72(1), pages 202-13, March.
  22. Mariacristina De Nardi, 2004. "Wealth Inequality and Intergenerational Links," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 743-768.
  23. Laitner, John, 1993. "Intergenerational and interhousehold economic links," Handbook of Population and Family Economics, Elsevier, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 5, pages 189-238 Elsevier.
  24. Hurd, Michael D, 1987. "Savings of the Elderly and Desired Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 298-312, June.
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