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Dissaving by the Elderly, Transfer Motives and Liquidity Constraints

Author

Listed:
  • Albert Ando
  • Luigi Guiso
  • Daniele Terlizzese

Abstract

Two explanations have been proposed for the observed slowness of wealth decumulation by the elderly in the literature: the precautionary saving induced by (uninsurable) uncertainty about the time of death or by the possibility of major catastrophes in old age that require large outlays; the desire to pass part of the accumulated assets on to one's heirs. We reconsider the issue of wealth decumulation by the elderly and assess the presence of a transfer motive, drawing on Italian data. We show that if intergenerational transfer of assets takes place well before the time of death, induced for instance by existence of liquidity constraints on younger families, then tests for the presence of a transfer motive based on the relative speed of decumulation of elderly households with and without a potential bequest motive might have little discriminatory power. We suggest that in this case one should look at the whole pattern of asset accumulation and decumulation. We also offer an alternative test of the bequest motive based on life insurance purchases.

Suggested Citation

  • Albert Ando & Luigi Guiso & Daniele Terlizzese, 1993. "Dissaving by the Elderly, Transfer Motives and Liquidity Constraints," NBER Working Papers 4569, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4569 Note: EFG
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    References listed on IDEAS

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    1. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    2. Modigliani, Franco, 1986. "Life Cycle, Individual Thrift, and the Wealth of Nations," American Economic Review, American Economic Association, vol. 76(3), pages 297-313, June.
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    4. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November.
    5. Guiso, Luigi & Jappelli, Tullio, 1991. "Intergenerational transfers and capital market imperfections : Evidence from a cross-section of Italian households," European Economic Review, Elsevier, vol. 35(1), pages 103-120, January.
    6. Albert Ando & Luigi Guiso & Daniele Terlizzese & Daniel Dorsainvil, 1991. "Younger Households Saving: Evidence From Japan and Italy," NBER Working Papers 3871, National Bureau of Economic Research, Inc.
    7. Ohtake, F., 1991. "Bequest Motives of Aged Households in Japan," ISER Discussion Paper 0249, Institute of Social and Economic Research, Osaka University.
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    9. Shorrocks, A F, 1975. "The Age-Wealth Relationship: A Cross-Section and Cohort Analysis," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 155-163, May.
    10. Barca, F. & Cannari, L. & Guiso, L., 1992. "Bequests and Saving for Retirement. What Impels the Accumulation of Wealth," Papers 165, Banca Italia - Servizio di Studi.
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    12. Kotlikoff, Laurence J, 1988. "Intergenerational Transfers and Savings," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 41-58, Spring.
    13. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-546, June.
    14. Rossi, N. & Visco, I., 1992. "Private Savings and Government Deficit in Italy (1951-1990)," Papers 178, Banca Italia - Servizio di Studi.
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    Citations

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    Cited by:

    1. Mauro Baranzini, 2005. "Modigliani's life-cycle theory of savings fifty years later," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 109-172.
    2. Ando, Albert & Moro, Andrea & Cordoba, Juan Pablo & Garland, Gonzalo, 1995. "Dynamics of demographic development and its impact on personal saving: case of Japan," Ricerche Economiche, Elsevier, vol. 49(3), pages 179-205, September.
    3. Guiso, Luigi & Jappelli, Tullio, 2002. "Private Transfers, Borrowing Constraints and the Timing of Homeownership," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 315-339, May.
    4. Albert Ando & Sergio Nicoletti-Altimari, 2004. "A micro simulation model of demographic development and households' economic behavior in Italy," Temi di discussione (Economic working papers) 533, Bank of Italy, Economic Research and International Relations Area.
    5. Ernesto Villanueva, 2005. "Inter vivos transfers and bequests in three OECD countries," Economic Policy, CEPR;CES;MSH, vol. 20(43), pages 505-565, July.
    6. Tullio Jappelli & Marco Pagano, 1994. "Personal Saving in Italy," NBER Chapters,in: International Comparisons of Household Saving, pages 237-268 National Bureau of Economic Research, Inc.
    7. repec:dau:papers:123456789/5369 is not listed on IDEAS
    8. Jappelli, Tullio, 1995. "Does social security reduce the accumulation of private wealth? Evidence from Italian survey data," Ricerche Economiche, Elsevier, vol. 49(1), pages 1-31, March.
    9. Mauro Baranzini, 2005. "Modigliani's life-cycle theory of savings fifty years later," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 109-172.
    10. Laura Bartiloro & Cristiana Rampazzi, 2015. "Financial support from the family network during the crisis," Questioni di Economia e Finanza (Occasional Papers) 291, Bank of Italy, Economic Research and International Relations Area.
    11. Tullio Jappelli & Luigi Pistaferri, 2000. "The dynamics of household wealth accumulation in Italy," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 269-295, June.
    12. Raun Ooijen & Rob Alessie & Adriaan Kalwij, 2015. "Saving Behavior and Portfolio Choice After Retirement," De Economist, Springer, vol. 163(3), pages 353-404, September.
    13. Albert Ando & Andrea Moro, 1995. "Demographic Dynamics, Labor Force Participation and Household Asset Accumulation: Case of Japan," NBER Working Papers 5261, National Bureau of Economic Research, Inc.
    14. FORNERO Elsa & ROMITI Agnese & ROSSI Cristina, 2013. "Does Home Ownership Crowd Out Investment in Children's Human Capital?," LISER Working Paper Series 2013-21, LISER.

    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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