Abstract: In this paper, we examine the effect of observed and unobserved
heterogeneity in the desire to die with positive net worth. Using a
structural life-cycle model nested in a switching regression with unknown
sample separation, we find that roughly 70 percent of the elderly single
population has a bequest motive that may or may not be active depending
on the level of resources at a given age. Both the presence and the
magnitude of the bequest motive are statistically and economically
significant. All else being equal, households with an operative bequest
motive spend between $4,000 and $9,000 a year less on consumption
expenditures on average. We conclude that, among the elderly single
households in our sample, approximately half of bequeathed wealth will be
due to a bequest motive.
Keywords: Bequest, bequest motive, heterogeneous preferences, wealth, saving
Full paper (421 KB PDF)
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Last update: June 7, 2004
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