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Motives for Bequests within the Middle Class

  • John Laitner

    (University of Michigan)

  • Amanda Sonnega

    (University of Michigan)

The life-cycle model of household behavior forms the basis for most economic analysis of Social Security, private pensions, and retirement. This project seeks to extend the usefulness of the life-cycle model by considering the role of middle-class inheritances and bequests. We use HRS data. Prior work by the authors identifies key information in the HRS on the sources of private intergenerational transfers, and it shows that the frequency of couples’ inheritances from both spouses’ family lines is higher than random behavior would imply. Using additional HRS data on the ratio of parent-to-child lifetime incomes, we analyze the motives behind HRS bequests. We find support for an unintentional transfer model in which bequests arise from residual, unspent parent life-cycle resources. And, we show that our model can account for the frequency of dual inheritances that earlier work revealed.

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Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp275.

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Length: 21 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:mrr:papers:wp275
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  1. Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, 1995. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," NBER Working Papers 5378, National Bureau of Economic Research, Inc.
  2. 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.
  3. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-98, December.
  4. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  5. John Laitner, 2002. "Wealth Inequality and Altruistic Bequests," American Economic Review, American Economic Association, vol. 92(2), pages 270-273, May.
  6. Laitner, John & Ohlsson, Henry, 1998. "Bequest Motives: A Comparison of Sweden and the United States," Working Paper Series 1998:16, Uppsala University, Department of Economics.
  7. Modigliani, Franco, 1985. "Life Cycle, Individual Thrift and the Wealth of Nations," Nobel Prize in Economics documents 1985-1, Nobel Prize Committee.
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