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Anticipated and Actual Bequests

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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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7380.

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Date of creation: Oct 1999
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Publication status: published as Anticipated and Actual Bequests , Michael D. Hurd, James P. Smith. in Themes in the Economics of Aging , Wise. 2001
Handle: RePEc:nbr:nberwo:7380

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  1. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 263-91, March.
  2. Hurd, M., 1999. "Mortality Risk and Consumption by Couples," Papers, RAND - Labor and Population Program 99-03, RAND - Labor and Population Program.
  3. 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, London School of Economics and Political Science, vol. 52(208), pages 421-34, November.
  4. James P. Smith, 2004. "Why is Wealth Inequality Rising?," Macroeconomics, EconWPA 0402012, EconWPA.
  5. Hurd, Michael D, 1987. "Savings of the Elderly and Desired Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 298-312, June.
  6. Michael Hurd, 1993. "The effect of changes in Social Security on bequests," Journal of Economics, Springer, Springer, vol. 58(1), pages 157-176, December.
  7. Casey B. Mulligan, . "Economic and Biological Approaches to Inheritance: Some Evidence 1996," University of Chicago - Population Research Center, Chicago - Population Research Center 95-14, Chicago - Population Research Center.
  8. Michael Hurd, 1993. "The effect of changes in Social Security on bequests," Journal of Economics, Springer, Springer, vol. 7(1), pages 157-176, December.
  9. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, Econometric Society, vol. 57(4), pages 779-813, July.
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