Working Paper: NBER ID: w20058
Authors: Mariacristina De Nardi; Fang Yang
Abstract: Households hold vastly heterogenous amounts of wealth when they reach retirement, and differences in lifetime earnings explain only part of this variation. This paper studies the role of intergenerational transmission of ability, voluntary bequest motives, and the recipiency of accidental and intended bequests (both in terms of timing and size), in generating wealth dispersion at retirement, in the context of a rich quantitative model. Modeling voluntary bequests, and realistically calibrating them, not only generates more wealth dispersion at retirement and reduces the correlation between retirement wealth and lifetime income, but also generates a skewed bequest distribution that is close to the one in the observed data.
Keywords: bequests; retirement wealth; intergenerational transmission; wealth inequality
JEL Codes: E21; J14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| differences in lifetime earnings (J31) | variation in retirement wealth (G51) |
| intergenerational factors (D15) | variation in retirement wealth (G51) |
| voluntary bequests (D64) | desire to save (D14) |
| desire to save (D14) | greater wealth inequality (D31) |
| greater wealth inequality (D31) | reduced correlation between wealth and lifetime earnings (D31) |
| intergenerational links (D15) | correlation between lifetime earnings and retirement wealth (J26) |
| measurement error in earnings and wealth (E01) | correlation between lifetime earnings and retirement wealth (J26) |
| bequest motives (D64) | wealth accumulation (E21) |