Bequests as a Means of Payment

B. Douglas Bernheim, Andrei Shleifer and Lawrence Summers

No 1303, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation, our understanding of bequest motives remains incomplete. We develop a simple model of"exchange-motivated" bequests, in which a testator influences the decisions ofhis beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries' actions. The model generates falsifiable empirical predictions which are inconsistent with other theories of intergenerational transfers. We present econometric and other evidence which strongly suggests that bequests are often used as a means of payment for services rendered by beneficiaries.

Date: 1984-03
Note: PE
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Published as Bernheim, B. Douglas, Andrei Shleifer and Lawrence H. Summers, "The Strategic Bequest Motive," Journal of Political Economy, Vol. 93, No. 6, (December 1985), pp. 1045-1076.

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