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Bequests as Signals: An Explanation for the Equal Division Puzzle

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  • B. Douglas Bernheim
  • Sergei Severinov

Abstract

In the United States, more than two-thirds of decedents with multichild families divide their estates exactly equally among their children. In contrast, intra vivos gifts are usually unequal. These findings challenge the validity of existing theories regarding the determination of intergenerational transfers. In this paper, we develop a theory that accounts for this puzzle, based on the notion that the division of bequests provides a signal about a parent's altruistic preferences. The theory can also explain the norm of unigeniture, which prevails in other societies.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7791.

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Date of creation: Jul 2000
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Publication status: published as Bernheim, B. Douglas and Sergei Severinov. "Bequests As Signals: An Explanation For The Equal Division Puzzle," Journal of Political Economy, 2003, v111(4,Aug), 733-764.
Handle: RePEc:nbr:nberwo:7791

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  1. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, Econometric Society, vol. 55(3), pages 647-61, May.
  2. Wilhelm, Mark O, 1996. "Bequest Behavior and the Effect of Heirs' Earnings: Testing the Altruistic Model of Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 874-92, September.
  3. Lundholm, Michael & Ohlsson, Henry, 1999. "Post Mortem Reputation, Compensatory Gifts and Equal Bequests," Working Paper Series, Uppsala University, Department of Economics 1999:3, Uppsala University, Department of Economics.
  4. W. G. Gale & J. K. Scholz, . "Intergenerational transfers and the accumulation of wealth," Institute for Research on Poverty Discussion Papers, University of Wisconsin Institute for Research on Poverty 1019-93, University of Wisconsin Institute for Research on Poverty.
  5. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
  6. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986. "The Strategic Bequest Motive," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 4(3), pages S151-82, July.
  7. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  8. Austen-Smith, David & Banks, Jeffrey S., 2000. "Cheap Talk and Burned Money," Journal of Economic Theory, Elsevier, Elsevier, vol. 91(1), pages 1-16, March.
  9. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  10. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(6), pages 1447-58, December.
  11. Cho, In-Koo & Sobel, Joel, 1990. "Strategic stability and uniqueness in signaling games," Journal of Economic Theory, Elsevier, Elsevier, vol. 50(2), pages 381-413, April.
  12. B. Douglas Bernheim, 1992. "How Strong are Bequest Motives? Evidence Based on Estimates of the Demand for Life Insurance and Annuities," NBER Working Papers 2942, National Bureau of Economic Research, Inc.
  13. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(5), pages 841-77, October.
  14. Banks, Jeffrey S., 1990. "A model of electoral competition with incomplete information," Journal of Economic Theory, Elsevier, Elsevier, vol. 50(2), pages 309-325, April.
  15. Bernheim, B Douglas & Bagwell, Kyle, 1988. "Is Everything Neutral?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(2), pages 308-38, April.
  16. Andrew B. Abel & B. Douglas Bernheim, 1992. "Fiscal Policy With Impure Intergenerational Altruism," NBER Working Papers 2613, National Bureau of Economic Research, Inc.
  17. 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.
  18. Tomes, Nigel, 1981. "The Family, Inheritance, and the Intergenerational Transmission of Inequality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 928-58, October.
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