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The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Bequest and Precautionary Motives

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Author Info
John Ameriks
Andrew Caplin
Steven Laufer
Stijn Van Nieuwerburgh

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Abstract

Strong bequest motives can explain low retirement spending, but so equally can strong precautionary motives. Given this identification problem, the recent tradition has been largely to ignore bequest motives. We develop a rich model of spending in retirement that allows for both motives, and introduce a "Medicaid aversion" parameter that plays a key role in determining precautionary savings. We implement a "strategic" survey to resolve the identification problem between bequest and precautionary motives. We find that strong bequest motives are too prevalent to be ignored. Moreover, Medicaid aversion is widespread, and helps explain the low spending of many middle class retirees.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13105.

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Date of creation: May 2007
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Handle: RePEc:nbr:nberwo:13105

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Find related papers by JEL classification:
D1 - Microeconomics - - Household Behavior
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
I0 - Health, Education, and Welfare - - General
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped

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