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Post Mortem Reputation, Compensatory Gifts and Equal Bequests

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  • Lundholm, Michael

    ()
    (Dept. of Economics, Stockholm University)

  • Ohlsson, Henry

    (Department of Economics Uppsala University)

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

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 1999:1.

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Length: 5 pages
Date of creation: 10 Sep 1999
Date of revision:
Handle: RePEc:hhs:sunrpe:1999_0001

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Fax: +46 8 16 14 25
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Web page: http://www.ne.su.se/
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Keywords: Altruism; bequests; inheritance; gifts; equal division; post mortem reputation; social norm; information.;

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  1. 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.
  2. 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.
  3. CREMER, Helmuth & PESTIAU, Pierre, 1993. "Bequests as a heir : "Discipline device"," CORE Discussion Papers 1993041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Stark, Oded, 1998. "Equal Bequests and Parental Altruism: Compatibility or Orthogonality?," Economics Series 54, Institute for Advanced Studies.
  5. 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.
  6. 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.
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