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The Contribution of Intergenerational Transfers to Total Wealth: A Reply

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  • Laurence J. Kotlikoff
  • Lawrence H. Summers

Abstract

This paper responds to Franco Modigliani's recent critique of our 1981 paper on the importance of intergenerational transfers for U.S. savings. Modigliani's paper is the latest salvo in a long running debate over the importance of intergenerational transfers in explaining savings behavior. While Modigliani corrects an algebraic error of minor consequences in our earlier paper, its correction does not, in our view, call into question the fundamental conclusion that life cycle considerations can account for only a small part of aggregate capital accumulation. Inevitably, it is possible to challenge aspects of any complex empirical calculation. Modigliani's attacks seem to us incorrect in most cases and generally fail to address our primary method of determining the importance of intergenerational transfers. Many considerations at least as important as those raised by Modigilani suggest that our method produces an overestimate of the importance of life cycle wealth.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1827.

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Date of creation: Feb 1986
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Publication status: published as Kotlikoff, Laurence J. and Lawrence H. Summers. "The Contribution of Intergenerational Transfers to Total Wealth": A Reply," Modelling the Accumulation and Distribution of Wealth, eds. D.Kessler and A. Masson, Oxford Press, 1987.
Handle: RePEc:nbr:nberwo:1827

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  1. Menchik, Paul L & David, Martin, 1983. "Income Distribution, Lifetime Savings, and Bequests," American Economic Review, American Economic Association, vol. 73(4), pages 672-90, September.
  2. Laurence J. Kotlikoff & John B. Shoven & Avia Spivak, 1983. "Annuity Markets, Savings, and the Capital Stock," NBER Working Papers 1250, National Bureau of Economic Research, Inc.
  3. Laurence J. Kotlikoff & Lawrence H. Summers, 1980. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," NBER Working Papers 0445, National Bureau of Economic Research, Inc.
  4. B. Douglas Bernheim, 1987. "Dissaving After Retirement: Testing the Pure Life Cycle Hypothesis," NBER Working Papers 1409, National Bureau of Economic Research, Inc.
  5. Eckstein, Zvi & Eichenbaum, Martin & Peled, Dan, 1985. "Uncertain lifetimes and the welfare enhancing properties of annuity markets and social security," Journal of Public Economics, Elsevier, vol. 26(3), pages 303-326, April.
  6. Laurence J. Kotlikoff & John B. Shoven & Avia Spivak, 1984. "The Impact of Annuity Insurance on Savings and Inequality," NBER Working Papers 1403, National Bureau of Economic Research, Inc.
  7. Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-77, June.
  8. B. Douglas Bernheim & Andrei Shleifer & Lawrence H. Summers, 1986. "Bequests as a Means of Payment," NBER Working Papers 1303, National Bureau of Economic Research, Inc.
  9. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-44, September.
  10. Mirer, Thad W, 1979. "The Wealth-Age Relation among the Aged," American Economic Review, American Economic Association, vol. 69(3), pages 435-43, June.
  11. E. Sheshinski & Y. Wiess, 1978. "Uncertainty and Optimal Social Security Systems," Working papers 225, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Benjamin M. Friedman & Mark Warshawsky, 1985. "The Cost of Annuities: Implications for Saving Behavior and Bequests," NBER Working Papers 1682, National Bureau of Economic Research, Inc.
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