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Inter vivos transfers and bequests in three OECD countries

Precautionary savings and accidental bequests

Ernesto Villanueva ()

Economic Policy, 2005, vol. 20, issue 43, 506-565

Abstract: Reforms reducing the generosity of pensions have distributional effects on future generations if individuals care about their descendants’ welfare, but only affect elderly individuals if bequests are the unintentional result of precautionary savings. And safety-net programmes such as unemployment insurance may displace sources of private help, such as that provided by living parents to their children in need. This paper provides comparable measures of how expected bequests and transfers vary with cumulated parental earnings in the United States, West Germany and the United Kingdom. The strength of bequest motives is empirically very weak in the available data. Private inter vivos transfers, which appear to depend on the recipients’ economic situation, are partly crowded out by public unemployment insurance programmes. Together, involuntary bequests and intentional inter vivos transfers appear to be an important channel of intergenerational inequality transmission, and strengthen substantially the relationship between an individual's and his parents’ economic status.— Ernesto Villanueva

Date: 2005
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