Empirical studies have shown that, for many countries, the distribution of wealth is much more concentrated than the one of labor earnings and that households with higher levels of lifetime income have higher lifetime saving rates. Previous models have had difficulty in generating these features. I construct a computable general equilibrium model with overlapping generations in which parents and children are linked by bequests and earnings persistence within families. I show that voluntary bequests are important to explain the emergence of large estates that characterize the top of the wealth distribution, while accidental bequests are not. In addition, the introduction of a bequest motive generates lifetime saving profiles more consistent with the data. Allowing for earnings persistence within families generates an even more concentrated wealth distribution. A cross-country comparison between the U.S. and Sweden shows that intergenerational linkages are important to explain the upper tail of the wealth distribution also in economies where redistribution programs are more prominent and there is less inequality. Moreover Sweden, with its generous social safety net, has a larger fraction of people with zero or negative wealth. The model is capable of reproducing this feature as well.
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Michael D. Hurd & James P. Smith, 2001.
"Anticipated and Actual Bequests,"
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in: Themes in the Economics of Aging, pages 357-392
National Bureau of Economic Research, Inc.
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repec:cup:macdyn:v:1:y:1997:i:2:p:387-422 is not listed on IDEAS
Davies, James B. & Shorrocks, Anthony F., 2000.
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Handbook of Income Distribution,
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[Downloadable!] (restricted)
Gary S. Becker & Nigel Tomes, 1994.
"X. Human Capital and the Rise and Fall of Families,"
NBER Chapters,
in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298
National Bureau of Economic Research, Inc.
[Downloadable!]
Lillard, Lee A & Willis, Robert J, 1978.
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Econometrica,
Econometric Society, vol. 46(5), pages 985-1012, September.
[Downloadable!] (restricted)
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Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2000.
"Do the Rich Save More?,"
NBER Working Papers
7906, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004.
"Do the Rich Save More?,"
Journal of Political Economy,
University of Chicago Press, vol. 112(2), pages 397-444, April.
[Downloadable!] (restricted)
Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002.
"Consumption Over the Life Cycle,"
Econometrica,
Econometric Society, vol. 70(1), pages 47-89, January.
[Downloadable!] (restricted)
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.