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Anticipated and Actual Bequests

In: Themes in the Economics of Aging

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  • Michael D. Hurd
  • James P. Smith

Abstract

This paper uses data on anticipated bequests from two waves of the Health and Retirement Study and the Asset and Health Dynamics of the Oldest Old (AHEAD), and on actual bequests from AHEAD. Actual bequests were measured in exit interviews given by proxy respondents for 774 AHEAD respondents who died between waves 1 and 2. Because the exit interview is representative of the elderly population, the distribution of estate values is quite different from that obtained from estate records, which represent just a wealthy subset of the population. Anticipated bequests were measured by the subjective probability of leaving bequests. Between waves 1 and 2, increases in bequest probabilities were associated with increases in the subjective probability of surviving, increments in household wealth, and widowing while out-of-pocket medical expenses reduced the likelihood of a bequest. By comparing bequest probabilities with baseline wealth we were able to test a main prediction of the life-cycle model, that individuals will dissave at advanced old-age. The AHEAD respondents anticipate substantial dissaving before they die.

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This chapter was published in:

  • David A. Wise, 2001. "Themes in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise01-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10334.

    Handle: RePEc:nbr:nberch:10334

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    1. Michael D. Hurd, 1999. "Mortality Risk and Consumption by Couples," Working Papers 99-03, RAND Corporation Publications Department.
    2. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
    3. Casey B. Mulligan, . "Economic and Biological Approaches to Inheritance: Some Evidence 1996," University of Chicago - Population Research Center 95-14, Chicago - Population Research Center.
    4. Michael Hurd, 1993. "The effect of changes in Social Security on bequests," Journal of Economics, Springer, vol. 7(1), pages 157-176, December.
    5. Hurd, Michael D, 1987. "Savings of the Elderly and Desired Bequests," American Economic Review, American Economic Association, vol. 77(3), pages 298-312, June.
    6. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
    7. Michael Hurd, 1993. "The effect of changes in Social Security on bequests," Journal of Economics, Springer, vol. 58(1), pages 157-176, December.
    8. David, Martin & Menchik, Paul L, 1985. "The Effect of Social Security on Lifetime Wealth Accumulation and Bequests," Economica, London School of Economics and Political Science, vol. 52(208), pages 421-34, November.
    9. James P. Smith, 2004. "Why is Wealth Inequality Rising?," Macroeconomics 0402012, EconWPA.
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