Working Paper: NBER ID: w4477
Authors: David N. Weil
Abstract: Research on intergenerational transmission of wealth has pointed to uncertainty -- about the date of one's own death, for example -- as a potential source of significant bequest flows. In this paper I examine the effects of this same uncertainty on the behavior of those who expect to receive bequests. Potential heirs who are prudent will consume less than would be warranted by the size of their expected bequests, and so on average consumption will rise at the age when actual bequests are received. I examine the effect of this uncertainty on the outcome of population aging. Population aging, by changing the relative sizes of the bequeathing generation and those receiving bequests, raises the average size of bequests received and reduces the saving of the bequest-receiving generation. I show that accounting for the effects of uncertainty slows down the reduction in saving that results from population aging.
Keywords: intergenerational transfers; bequests; uncertainty; population aging; consumption behavior
JEL Codes: D91; H55; J14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| uncertainty about bequests (D14) | reduced consumption (E21) |
| reduced consumption (E21) | increase in consumption at bequest receipt (D15) |
| population aging (J11) | average size of bequests (D64) |
| average size of bequests (D64) | reduced saving of bequest-receiving generation (D15) |