Dissaving by the Elderly, Transfer Motives and Liquidity Constraints

Albert Ando, Luigi Guiso and Daniele Terlizzese

No 4569, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Two explanations have been proposed for the observed slowness of wealth decumulation by the elderly in the literature: the precautionary saving induced by (uninsurable) uncertainty about the time of death or by the possibility of major catastrophes in old age that require large outlays; the desire to pass part of the accumulated assets on to one's heirs. We reconsider the issue of wealth decumulation by the elderly and assess the presence of a transfer motive, drawing on Italian data. We show that if intergenerational transfer of assets takes place well before the time of death, induced for instance by existence of liquidity constraints on younger families, then tests for the presence of a transfer motive based on the relative speed of decumulation of elderly households with and without a potential bequest motive might have little discriminatory power. We suggest that in this case one should look at the whole pattern of asset accumulation and decumulation. We also offer an alternative test of the bequest motive based on life insurance purchases.

JEL-codes: D1 E2 (search for similar items in EconPapers)
Date: 1993-12
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published as Ando, Albert, Luigi Guiso, and Ignazio Visco (eds.) Saving and the accumulation of wealth: Essays on Italian household and government saving behavior. Cambridge; New York and Melbourne: Cambridge University Press, 1994.

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