CAPITAL ACCUMULATION IN A BEQUEST ECONOMY

Michel Strawczynski

No 1995.08, Bank of Israel Working Papers from Bank of Israel

Abstract: An augmented life cycle model is used in order to characterize capital accumulation in an overlapping generations economy with altruistic agents. Precautionary savings serve as an instrument to face two different types of idiosyncratic income uncertainty: i) individual's income uncertainty.* in the future and ii) future generation's income uncertainty. By performing a calibrated simulation of the model, it is shown that precautionary savings aimed at providing bequests can account for a vast portion of capital accumulation. Empirical evidence on income uncertainty calls for further tests on the impact of future generation's income uncertainty on precautionary savings.

Pages: 28 pages
Date: 1995-08
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https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_1995.08.pdf First version, 1995 (application/pdf)

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