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Intergenerational Transfers and the Accumulation of Wealth

  • William G. Gale
  • John Karl Scholz

This paper uses household data to provide direct estimates of intergenerational transfers as a source of wealth. The authors distinguish between intended transfers (for example, gifts to other households) and possibly unintended transfers (bequests) and estimate that intended transfers account for at least 20 percent of net worth. Thus, a significant portion of the U.S. wealth cannot be explained by the life-cycle model, even when the model is augmented to allow for bequests. Estimated bequests can account for an additional 31 percent of net worth. The authors also show that transfers among living people are about half as large as bequests.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.8.4.145
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 8 (1994)
Issue (Month): 4 (Fall)
Pages: 145-160

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Handle: RePEc:aea:jecper:v:8:y:1994:i:4:p:145-60
Note: DOI: 10.1257/jep.8.4.145
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  1. B. Douglas Bernheim, 1987. "Does the Estate Tax Raise Revenue?," NBER Chapters, in: Tax Policy and the Economy, Volume 1, pages 113-138 National Bureau of Economic Research, Inc.
  2. Laitner, John, 1992. "Random earnings differences, lifetime liquidity constraints, and altruistic intergenerational transfers," Journal of Economic Theory, Elsevier, vol. 58(2), pages 135-170, December.
  3. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," NBER Working Papers 0362, National Bureau of Economic Research, Inc.
  4. Hurd, Michael D, 1987. "Savings of the Elderly and Desired Bequests," American Economic Review, American Economic Association, vol. 77(3), pages 298-312, June.
  5. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986. "The Strategic Bequest Motive," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages S151-82, July.
  6. Laurence J. Kotlikoff & Lawrence H. Summers, 1986. "The Contribution of Intergenerational Transfers to Total Wealth: A Reply," NBER Working Papers 1827, National Bureau of Economic Research, Inc.
  7. Alan J. Auerbach & Laurence J. Kotlikoff & David N. Weil, 1992. "The Increasing Annuitization of the Elderly- Estimates and Implications for Intergenerational Tranfers, Inequality, and National Saving," NBER Working Papers 4182, National Bureau of Economic Research, Inc.
  8. Menchik, Paul L, 1980. "Primogeniture, Equal Sharing, and the U. S. Distribution of Wealth," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 299-316, March.
  9. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  10. Donald Cox & Fredric Raines, 1985. "Interfamily Transfers and Income Redistribution," NBER Chapters, in: Horizontal Equity, Uncertainty, and Economic Well-Being, pages 393-426 National Bureau of Economic Research, Inc.
  11. Michael D. Hurd & B. Gabriela Mundaca, 1989. "The Importance of Gifts and Inheritances Among the Affluent," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 737-764 National Bureau of Economic Research, Inc.
  12. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
  13. 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.
  14. Michael R. Darby, 1977. "The Effects of Social Security on Income and the Capital Stock," UCLA Economics Working Papers 095A, UCLA Department of Economics.
  15. Kurz, Mordecai, 1984. "Capital Accumulation and the Characteristics of Private Inter-Generational Transfers," Economica, London School of Economics and Political Science, vol. 51(201), pages 1-22, February.
  16. White, Betsy Buttrill, 1978. "Empirical Tests of the Life Cycle Hypothesis," American Economic Review, American Economic Association, vol. 68(4), pages 547-60, September.
  17. Tomes, Nigel, 1981. "The Family, Inheritance, and the Intergenerational Transmission of Inequality," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 928-58, October.
  18. Aaron, Henry J. & Munnell, Alicia H., 1992. "Reassessing the Role for Wealth Transfer Taxes," National Tax Journal, National Tax Association, vol. 45(2), pages 119-43, June.
  19. 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.
  20. Cox, Donald, 1990. "Intergenerational Transfers and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 187-217, February.
  21. Bernheim, B Douglas, 1991. "How Strong Are Bequest Motives? Evidence Based on Estimates of the Demand for Life Insurance and Annuities," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 899-927, October.
  22. Kotlikoff, Laurence J, 1988. "Intergenerational Transfers and Savings," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 41-58, Spring.
  23. Hayashi, Fumio & Ando, Albert & Ferris, Richard, 1988. "Life cycle and bequest savings A study of Japanese and U.S. households based on data from the 1984 NSFIE and the 1983 survey of consumer finances," Journal of the Japanese and International Economies, Elsevier, vol. 2(4), pages 450-491, December.
  24. Robert E. Lipsey & Helen Stone Tice, 1989. "The Measurement of Saving, Investment, and Wealth," NBER Books, National Bureau of Economic Research, Inc, number lips89-1.
  25. Abel, Andrew B, 1985. "Precautionary Saving and Accidental Bequests," American Economic Review, American Economic Association, vol. 75(4), pages 777-91, September.
  26. Davies, James B, 1982. "The Relative Impact of Inheritance and Other Factors on Economic Inequality," The Quarterly Journal of Economics, MIT Press, vol. 97(3), pages 471-98, August.
  27. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June.
  28. 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.
  29. Kessler, Denis & Masson, Andre, 1989. "Bequest and Wealth Accumulation: Are Some Pieces of the Puzzle Missing?," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 141-52, Summer.
  30. Lord, William & Rangazas, Peter, 1991. "Savings and Wealth in Models with Altruistic Bequests," American Economic Review, American Economic Association, vol. 81(1), pages 289-96, March.
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