Bequests and Social Security With Uncertain Lifetimes
The fact that consumers do not know in advance the dates at which they will die effects their individual consumption and portfolio decisions. In general, some consumers will end up leaving bequests at death, even if they have no bequest motive, simply because they happen to die at a time when they are holding wealth to provide for their own future consumption. In the model of this paper,consumers who are otherwise identical, die (randomly) at different ages and thus leave bequests of different sizes to their heirs. Therefore, there is intra-cohort variation in wealth and consumption even if all consumers have the same labor income, taxes, and social security benefits. This paper presents explicit steady state distributions for consumption and wealth. The introduction of an actuarially fair social security system reduces steady state private wealth by more than one-for-one so that, even in a fully funded system, national wealth falls. In addition, all central moments of the steady state distributions of consumption and wealth are reduced by actuarially fair social security.
|Date of creation:||Jun 1984|
|Date of revision:|
|Publication status:||published as Abel, Andrew B. 'Precautionary Saving and Accidental Bequests," American Economic Review, Vol. 75, No. 4, September 1985, pp. 777-791.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Drazen, Allan, 1978. "Government Debt, Human Capital, and Bequests in a Life-Cycle Model," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 505-16, June.
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Eckstein, Zvi & Eichenbaum, Martin & Peled, Dan, 1985. "Uncertain lifetimes and the welfare enhancing properties of annuity markets and social security," Journal of Public Economics, Elsevier, vol. 26(3), pages 303-326, April.
- Sheshinski, Eytan & Weiss, Yoram, 1981.
"Uncertainty and Optimal Social Security Systems,"
The Quarterly Journal of Economics,
MIT Press, vol. 96(2), pages 189-206, May.
- Pelzman, Joseph & Rousslang, Don, 1982. "A Note on Uncertain Lifetimes: A Comment," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 181-83, February.
- Levhari, David & Mirman, Leonard J, 1977. "Savings and Consumption with an Uncertain Horizon," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 265-81, April.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1372. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.