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Is a Bird in Hand Worth More than a Bird in the Bush? Intergenerational Transfers and Savings Behavior

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  • Jeffrey R. Brown
  • Scott J. Weisbenner

Abstract

This paper provides new evidence on the decomposition of aggregate household wealth into life-cycle and transfer wealth. Using the 1998 Survey of Consumer Finances, it finds that transfer wealth accounts for approximately one-fifth to one-quarter of aggregate wealth, suggesting a larger role for life-cycle savings than some previous estimates. Despite the smaller aggregate size of transfer wealth, its concentration among a small number of households suggests that it can still have an important effect on the savings decisions of recipients. Estimates suggest that past receipts of transfer wealth reduce life-cycle savings by as much as dollar-for-dollar, while expected future transfers do not produce such a crowd-out effect.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8753.

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Date of creation: Jan 2002
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Publication status: published as Wise, D. (ed.) Perspectives on the Economics of Aging. Chicago, IL: University of Chicago Press, 2004.
Handle: RePEc:nbr:nberwo:8753

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  1. Kessler, Denis & Masson, Andre, 1989. "Bequest and Wealth Accumulation: Are Some Pieces of the Puzzle Missing?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 3(3), pages 141-52, Summer.
  2. F. Thomas Juster & Joseph P. Lupton & James P. Smith & Frank Stafford, 2004. "The decline in household saving and the wealth effect," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2004-32, Board of Governors of the Federal Reserve System (U.S.).
  3. Michael D. Hurd & B. Gabriela Mundaca, 1989. "The Importance of Gifts and Inheritances Among the Affluent," NBER Chapters, National Bureau of Economic Research, Inc, in: The Measurement of Saving, Investment, and Wealth, pages 737-764 National Bureau of Economic Research, Inc.
  4. James Poterba, 1997. "The Estate Tax and After-Tax Investment Returns," NBER Working Papers 6337, National Bureau of Economic Research, Inc.
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  6. William G. Gale & Joel B. Slemrod, 2001. "Rethinking the Estate and Gift Tax: Overview," NBER Working Papers 8205, National Bureau of Economic Research, Inc.
  7. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 2(2), pages 15-40, Spring.
  8. William G. Gale & John Karl Scholz, 1991. "Intergenerational Transfers and the Accumulation of Wealth," UCLA Economics Working Papers, UCLA Department of Economics 624, UCLA Department of Economics.
  9. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 706-32, August.
  10. Laurence J. Kotlikoff, 1987. "Intergenerational Transfers and Savings," NBER Working Papers 2237, National Bureau of Economic Research, Inc.
  11. Lord, William & Rangazas, Peter, 1991. "Savings and Wealth in Models with Altruistic Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 81(1), pages 289-96, March.
  12. Laitner, John, 1992. "Random earnings differences, lifetime liquidity constraints, and altruistic intergenerational transfers," Journal of Economic Theory, Elsevier, Elsevier, vol. 58(2), pages 135-170, December.
  13. James M. Poterba & Scott Weisbenner, 2000. "The Distributional Burden of Taxing Estates and Unrealized Capital Gains at the Time of Death," NBER Working Papers 7811, National Bureau of Economic Research, Inc.
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Cited by:
  1. Blackburn, Keith & Cipriani, Giam Pietro, 2005. "Intergenerational transfers and demographic transition," Journal of Development Economics, Elsevier, Elsevier, vol. 78(1), pages 191-214, October.

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