Like Father, Like Son: Inheriting and Bequeathing

Carlos Bethencourt and Lars Kunze

German Economic Review, 2019, vol. 20, issue 2, 194-216

Abstract: This paper incorporates indirect reciprocal behavior in the context of bequeathing decisions into an otherwise standard OLG model. We provide conditions for the existence of a unique steady state with operative bequests. Contrary to standard OLG models, we show that taking into account such behavioral interactions allows one to rationalize both an increasing and U-shaped pattern of the inheritance to GDP ratio over time, consistent with recent empirical evidence. Moreover, the model predicts a nonlinear (U-shaped) relationship between the size of an unfunded social security program and the long-run stock of per capita capital, which in turn provides a novel explanation of the inconclusive empirical findings on the relationship between social security, savings and long-run growth. Ricardian equivalence is shown to hold in a special case of the model.

Keywords: Intergenerational transfers; indirect reciprocity; unfunded social security; overlapping generations; Ricardian equivalence (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Journal Article: Like Father, Like Son: Inheriting and Bequeathing (2019)
Working Paper: Like Father, Like Son: Inheriting and Bequeathing (2012)
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DOI: 10.1111/geer.12143

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