Junior is Rich: Bequests as Consumption

George Constantinides, John B. Donaldson and Rajnish Mehra

No 11122, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We explore the consequences for asset pricing of admitting a bequest motive into an otherwise standard overlapping generations model where agents trade equity and perpetual debt securities. Prices of securities are seen to be approximately 50% higher in an economy with bequests as compared to an otherwise identical one where bequests are absent. Robust estimates of the equity premium are obtained in several cases where the desire to leave bequests is modest relative to the desire for old age consumption.

JEL-codes: D1 D91 E2 E60 G11 (search for similar items in EconPapers)
Date: 2005-02
New Economics Papers: this item is included in nep-mac
Note: AP
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Citations: View citations in EconPapers (2)

Published as George Constantinides & John Donaldson & Rajnish Mehra, 2007. "Junior is rich: bequests as consumption," Economic Theory, Springer, vol. 32(1), pages 125-155, July.

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