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Utility from Accumulation

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  • Louis Kaplow

Abstract

The possibility that individuals may derive utility from the mere fact of holding wealth has long been recognized. A simple intertemporal model featuring utility from accumulation is used here to examine consumption and savings, the choice between inter vivos gifts and bequests (both to descendants and to charities), and levels of annuitization. Introducing utility from accumulation helps to explain a number of empirical regularities that otherwise seem inconsistent with optimizing behavior. Moreover, because individuals who derive significant utility from accumulation will tend to save more and, in the long run, give more than others do, this source of utility may be especially important in analyzing savings behavior, gifts and bequests, and charitable contributions.

Suggested Citation

  • Louis Kaplow, 2009. "Utility from Accumulation," NBER Working Papers 15595, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15595 Note: PE
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    References listed on IDEAS

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    1. Gong, Liutang & Zou, Heng-fu, 2002. "Direct preferences for wealth, the risk premium puzzle, growth, and policy effectiveness," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 247-270, February.
    2. Kuznitz, Arik & Kandel, Shmuel & Fos, Vyacheslav, 2008. "A portfolio choice model with utility from anticipation of future consumption and stock market mean reversion," European Economic Review, Elsevier, vol. 52(8), pages 1338-1352, November.
    3. Thomas Davidoff & Jeffrey R. Brown & Peter A. Diamond, 2005. "Annuities and Individual Welfare," American Economic Review, American Economic Association, vol. 95(5), pages 1573-1590, December.
    4. B. Douglas Bernheim & Antonio Rangel, 2005. "Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers," NBER Working Papers 11518, National Bureau of Economic Research, Inc.
    5. Bernheim, B. Douglas, 2002. "Taxation and saving," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 18, pages 1173-1249 Elsevier.
    6. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, pages 565-637.
    7. Bakshi, Gurdip S & Chen, Zhiwu, 1996. "The Spirit of Capitalism and Stock-Market Prices," American Economic Review, American Economic Association, vol. 86(1), pages 133-157, March.
    8. Venti, Steven F & Wise, David A, 1998. "The Cause of Wealth Dispersion at Retirement: Choice or Chance?," American Economic Review, American Economic Association, vol. 88(2), pages 185-191, May.
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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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