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Bequest choices under uncertainty

Rodrigo Raad () and Gilvan R. Guedes
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Gilvan R. Guedes: Cedeplar-UFMG

No 504, Textos para Discussão Cedeplar-UFMG from Cedeplar, Universidade Federal de Minas Gerais

Abstract: This paper develops a theoretical model for parental behavior regarding land inheritance, explicitly accounting for consumption and human capital savings strategies. We distinguish two types of modeling: one with and another without strategic behavior. In the first model, we assume that children do not act strategically towards their parent; in this case, the parent chooses how much to bequeath contingent upon each child's return to human capital. We find that the child with the highest return to human capital is more likely to receive a larger share of the land if difference in offspring's returns is large enough. This result points to a non-altruistic behavior. In the second model, we allow for each child to influence parent's optimal choice of bequest by providing services to the latter. We show a numerical example in which the child's strategy for service provision is sufficient to assure that the one providing more service will receive a larger share of the bequest in a Nash equilibrium. This holds, regardless of differences in offspring returns to human capital.

Keywords: Land inheritance; Altruism; Exchange motive; Nash equilibrium (search for similar items in EconPapers)
JEL-codes: K11 P51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mic
Date: 2014-05
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