Bequest Expectations: Evidence from the 1989 Survey of Consumer Finances

This study uses the 1989 Survey of Consumer Finances to examine the effects of respondents' characteristics on their expectations of receiving inheritances and leaving bequests, based on altruistic bequest theory. The results of logistic regression analysis suggest that respondents' sociodemographic characteristics such as education, marital status, race, presence of living parents, and number of siblings significantly affect their anticipation of receiving an inheritance. People's expectations of leaving a bequest are found to be positively and significantly related to the value of nonliquid asset holdings, education, marital status, and positive attitude toward bequests but inversely associated with the total number of children in the household and being disabled. Those who are self-employed and middle-aged are more likely to anticipate leaving bequests.     

Are Americans and Indians more altruistic than the Japanese and Chinese? Evidence from a new international survey of bequest plans

This paper discusses three alternative assumptions concerning household preferences (altruism, self-interest, and a desire for dynasty building) and shows that these assumptions have very different implications for bequest motives and bequest division. After reviewing some of the literature on actual bequests, bequest motives, and bequest division, the paper presents data on the strength of bequest motives, stated bequest motives, and bequest division plans from a new international survey conducted in China, India, Japan, and the United States. It finds striking inter-country differences in bequest plans, with the bequest plans of Americans and Indians appearing to be much more consistent with altruistic preferences than those of the Japanese and Chinese and the bequest plans of the Japanese and Chinese appearing to be much more consistent with selfish preferences than those of Americans and Indians. These findings have important implications for the efficacy and desirability of stimulative fiscal policies, public pensions, and inheritance taxes.     

PLANNED AND UNPLANNED BEQUESTS

We distinguish between bequests that are planned as part of a lifetime optimization process and those that are the unplanned result of errors in forecasting the date of death. Given the initial endowment we expect a positive relation between the bequest and the planning horizon, and a negative relation between unexpectedly long life and the bequest. A unique data set on wealthy decedents and their parents provides measures of expected horizons based on parents' longevity. Both predictions are confirmed, and there is an especially large and significant positive relation between the bequest and the length of the planning horizon.     

Inheritances and Bequest Planning: Evidence from the Survey of Consumer Finances

Using data from the Survey of Consumer Finances, this paper documented the positive correlation between the receipt of an inheritance and the expectation of leaving a bequest. Inheritance recipients were found to have a higher probability of planning to leave a bequest relative to households that had not received an inheritance. Conditional on having already received an inheritance, the likelihood of expecting to leave a bequest was even larger for households that anticipated to receive an inheritance in the future. The findings in this paper suggest that inheritances already received or expected to be received may be an important transmission mechanism underlying the bequest motive.     

THE SUPPLY OF CHILDREN'S TIME TO DISABLED ELDERLY PARENTS

This study develops and tests a model of supply of children's time to disabled elderly parents, using data from the National Long-Term Care Survey. The model, which assumes strategic behavior among relatives, offers predictions about effects of changes in the price of paid personal care, parent's wealth, kid's wage rates, public in-kind subsidies of personal care, and parent's relative bargaining power on care provided by children. Although several statistically significant relationships are obtained, the evidence does not generally indicate that children's provision of care to parents is guided by a strategic bequest motive.     

BEQUEST RECEIPT AND FAMILY SIZE EFFECTS

This article tests the connection between credit constraints and negative family size effects on child earnings using bequest receipt to signal access to credit markets. The dominant economic model of fertility predicts a negative relationship between family size and child achievement. In the model, limits on borrowing create this "quality-quantity trade-off." This article tests for the relevance of credit constraints using Panel Study of Income Dynamics data to compare family size effects across groups defined by bequest receipt. Contrary to the credit constraints explanation, those receiving large bequests exhibit large family size effects, while those not receiving bequests show little to no effect . ( JEL J13, D1, I2)     

Repeal of the Estate Tax and Its Impact on Philanthropy

The estate tax has many advocates and opponents. We present a review of the primary arguments and empirical evidence promulgated in support of continuation and for repeal. Overall, we find that there are plausible theories and strong, but not definitive, empirical evidence on both sides of the issue. Further research is needed that more clearly isolates differences between the income‐tax and estate‐tax (that is, the after‐tax cost or “price” of a donation or bequest) effects, the independent‐income and wealth effects (how having higher income or wealth has an effect on giving during life and at death), and married and single estate tax filers. These differences can be best isolated using longitudinal data. Data and analyses for both the short run and long run are necessary before society can reasonably predict the impact the repeal of the estate tax will have on both giving during life and charitable bequests.     

Bequest Motives, Social Security, and Economic Growth

This article conducts a systematic analysis of four bequest motives in a simple model of endogenous growth. It analyzes how bequest motives affect fertility, savings, growth, and the effects of pay-as-you-go Social Security. It is found that altruistic and exchange motives give equivalent outcomes if the discount factors are set the same. The outcome under the joy-of-giving motive may involve a higher bequest ratio, higher saving, and better growth rates than that under altruism. If bequests are accidental, the equilibrium values will depend on the probability of survival. Moreover, the results provide testable implications on bequest motives.     

Bequest motives and barriers to giving: The case of direct mail donors

Charitable bequests currently account for 9 percent of overall giving in the United States. In this study we examine the motives for this form of support and the potential barriers to giving perceived by members of bequest societies or legacy clubs solicited through direct mail. Through a series of eight focus groups we delineate the individual motives for offering a bequest, the organizational factors that drive gifts of this type, and the potential barriers that could prevent such a gift from being made. The implications for professional fundraising practice are explored.     

EXPERIMENTAL TESTS OF RICARDIAN EQUIVALENCE

This study employs laboratory experiments to test aspects of Ricardian equivalence. An overlapping generations model forms the basis of the experimental design. Whenever Ricardian equivalence predicts a positive bequest, outcomes close to those predicted occur, after allowance for learning. Observed deviations from Ricardian equilibrium are small, but biased in a Keynesian direction: changes in bequests do not fully offset changes in government debt. The imposition of a binding nonnegativity constraint on bequests produces the predicted neoclassical behavior. The cost to the players of deviations from the theoretical equilibrium is apparently an important determinant of the variability of observed deviations.     

Do People Save or Spend Their Inheritances? Understanding What Happens to Inherited Wealth

Almost $4 trillion dollars of wealth is currently held by families with a life expectancy of less than 10 years. When that wealth is inherited, will it be retained or spent quickly? Results from the NLSY79, a longitudinal survey covering people in their 20s, 30s, and 40s suggest roughly half of all money inherited is saved and the other half spent or lost investing. These spending and saving decisions are made by a concentrated group with about one-fifth of all families getting an inheritance and about one-seventh expecting to receive an inheritance. Suggestions to increase savings from inheritances are discussed.     

SWITCHING REGRESSION ESTIMATES OF THE INTERGENERATIONAL PERSISTENCE OF CONSUMPTION

The influential economic theory of intergenerational transfers predicts a negative connection between credit constraints and intergenerational mobility of consumption. Existing work has used bequest receipt to signal a parent's access to credit markets when investing in his children's human capital. However, measurement error in bequest receipt generates misclassification error and, in turn, attenuation bias. Employing switching regressions with imperfect sample separation to deal with this error, we show that the intergenerational persistence of consumption in the United States for credit constrained families is much higher than that for unconstrained families, contrary to what the theory implies. This means that children from constrained families are more likely to have consumption levels similar to those of their parents than children from unconstrained families. Our results are robust to the choice of bequest variables and other predictive variables in the switching equation. (JEL C13, D12, E21, J62)     

Wer erbt Mehr? Erbschaften, Sozialstruktur und Alterssicherung

How do inheritances affect social structure, wealth formation, and provision for old age? Who benefits the most from inheritances? We analyse these questions based on the 2001 wave of the Socio-Economic Panel, which gives information on the deceased, and on the type, time, chance, and amount of the inheritance. Our findings confirm the theoretical hypotheses in general. Inheritance research is intergenerational research: most inheritances come from parents and benefit the recipients in the second half of their lives. However, the chances of receiving an inheritance and amounts inherited are distributed very unevenly. West Germans inherit significantly more frequently and larger amounts than East Germans due to the continuing effects of conditions in the former GDR. Foreigners have particularly low chances of receiving an inheritance. Thus, provision for old age through inheritance is limited mainly to specific groups of people. The most advantaged groups are the highly educated classes, which already receive higher (retirement) income.     

BLACK-WHITE WEALTH INEQUALITY: IS INHERITANCE THE REASON?

Racial differences in the receipt of financial inheritances he& to explain why the average difference in wealth between black and white households is larger than the average difference in income. Using data from a panel of prime-aged males and from a representative survey of the U.S. population, we document the greater likelihood of white households receiving an inheritance than black households. Controlling for other factors which contribute to racial differences in wealth, we estimate that financial inheritances may account for between 10% and 20% of the average difference in black-white household wealth.     

Catching Up or Falling Behind? Continuing Wealth Disparities for Immigrants to Canada by Region of Origin and Cohort

This paper investigates wealth disparities among first‐generation immigrants using data from the 2012 Survey of Financial Security. We apply logistic and linear regression models to estimate disparities in homeownership and household equivalent net worth by immigrant status, region of origin, and time since arrival. By focusing on immigrant families from different regions who entered Canada at different points in time, this research applies theories related to assimilation, human capital, and structural barriers to wealth. Our findings demonstrate that even though many immigrant families transition into homeownership and grow their wealth over time, certain first‐generation immigrant groups continue to experience wealth disparities many years after their arrival to Canada. In particular, immigrant families from African, Asian, and Middle Eastern countries experienced the largest wealth gaps. Cet article examine les disparités de richesse entre les immigrants de première génération en utilisant les données de l'Enquête 2012 sur la sécurité financière. Nous appliquons des modèles de régression logistique et linéaire pour estimer les disparités dans la propriété et valeur nette des ménages équivalente par le statut d'immigrant, la région d'origine, et le temps écoulé depuis leur arrivée. En se concentrant sur les familles d'immigrants de différentes régions qui sont entrés au Canada à différents points dans le temps, cette recherche applique les théories liées à l'assimilation, le capital humain, et les obstacles structurels à la richesse. Nos résultats démontrent que même si de nombreuses familles d'immigrants transition vers la propriété et de croître leur richesse au fil du temps, certains groupes d'immigrants de première génération continuent d'éprouver des disparités de richesse de nombreuses années après leur arrivée au Canada. En particulier, les familles d'immigrants d'Afrique, d'Asie, et les pays du Moyen‐Orient ont connu les plus grands écarts de richesse.     

Transmission and inequality of wealth: An empirical study of wealth mobility from 1800 to 1938 in France

This paper endeavors to measure the intergenerational transmission of wealth inequalities over the 1800–1938 period. For this purpose, we have consulted historical data composed of wealth genealogies covering the 19th and first half of the 20th centuries. The database was created from families included in the “3,000 families” survey of those individuals residing in the Loire-Inférieure département. The empirical study reveals a relatively large degree of intergenerational immobility: those whose father had twice the average level of wealth themselves upon death leave behind 1.45 times the average wealth of their generation.     

A MODEL OF "FAMILY FAIRNESS" AND ITS IMPLICATIONS FOR DEBT NEUTRALITY

Evidence suggests that a signcant proportion, though by no means all, of bequests is equally divided among the beneficiaries. This is inconsistent with standard models of bequests, which predict that equal division should occur only by chance. This paper proposes a modified model incorporating "family fairness" as well as utilitarianism as an influence on behavior. Various implications for debt neutrality are analyzed.     

The political mobilization of Irish farmers

L'article cherche une explication à la rébellion agraire en Irlande à la fin du dix-neuvième siècle. Bien que le niveau de mécontentement en Irlande rurale ait étéélevé lorsque la rébellion a éclate, une telle situation n'était pas sans précédent. Le mécontentement avait été tout aussi intense auparavant (surtout durant la première moitié du dix-neuvième siècle) sans de conséquences politiques semblables. Afin de comprendre pourquoi c'est à la fin du dix-neuvième siècle que les tenanciers ruraux irlandais se sont rebellés, il faut se rendre compte qu'un nouvel ensemble de conditions sociales favorables à la mobilisation politique rurale sont apparues durant les décades qui ont précédé la rébellion. Sans épuiser le sujet, l'auteur suggère que ces conditions étaient un leadership fourni par le mouvement nationaliste et une base organisationnelle fournie par un nombre de structures, en particulier la relation de coopération qui s'est développée durant la période qui a suivi la famine entre les tenanciers ruraux et une partie de la population des villes. L'étude supporte la thèse de la mobilisation plutôt que celle du mécontentement pour l'analyse des mouvements de contestations. This paper seeks to explain why an agrarian rebellion broke out in Ireland in the late nineteenth century. Although the level of discontent in rural Ireland was certainly high when the rebellion broke out, such a situation was not unprecedented. Discontent had been just as intense at earlier points in time (most notably during the first half of the nineteenth century) without similar political consequences. In order to understand why it was in the late nineteenth century that Irish rural tenants rebelled, we have to recognize that in the decades preceding the rebellion there had developed a new set of social conditions that facilitated rural political mobilization. Without exhausting the subject, the author suggests that these conditions consisted of leadership provided by the nationalist movement and an organizational base, provided by a number of structures, among which special emphasis is given to the cooperative relationship that emerged in the postfamine period between rural tenants and a segment of the town population. The study gives support to the mobilization rather than to the discontent thesis for the study of social protest.     

Changes in the Canadian Business and Legal Elites, 1870–1970*

Cet article examine les origines sociales et les activités de deux élites canadiennes au dix-neuvième et vingtième siècle, à savoir l'élite des affaires et du droit. Il fournit une explication provisoire des transformations qui ont eu lieu quant à l'aecès à la richesse, à l'autorité, au prestige et à l'influence au cours des cent dernières années. En tant que travail d'exploration, cet essai révèle le besoin d'aborder l'histoire de la stratification au Canada d'une façon jusqu'à maintenant négligée, à savoir par l'analyse historique des institutions jouant un rôle dans la stratification. This paper examines the social origins and activities of two Canadian elites, those of business and law, in the nineteenth and twentieth centuries. It attempts a provisional explanation of the changes in access to wealth, authority, prominence, and influence that have occurred in the last hundred years. As an explanatory study, this paper suggests the need for an approach to the history of stratification in Canada that has not received much attention heretofore; namely, the historical analysis of stratifying institutions.     

Wealth and inheritance in Britain from 1896 to the present

Personal wealth has grown since the 1970s twice as fast in real terms as national income. Has this rise in the wealth-income ratio led to a corresponding increase in the wealth being passed on from one generation to the next? Are we returning to the levels of inheritance found in the 19th century? The aim of this paper is to construct UK evidence on the extent of the transmission of wealth in the form of estates and gifts inter vivos. It takes a long-run view of inheritance, starting from 1896, when the modern Estate Duty was introduced, and exploits the extensive estate data published over the years. Construction of a long-run time series for more than a century is challenging, and there are important limitations. The resulting time-series demonstrates the major importance of inheritance in the UK before the First World War, when the total transmitted wealth represented some 20 per cent of net national income. In the inter-war period, the total was around 15 per cent, falling to some 10 per cent after the Second World War, and then falling further to below 5 per cent in the late 1970s. Since then, there has indeed been an upturn: a rise from 4.8 per cent in 1977 to 8.2 per cent in 2006. This increase was more or less in line with the increase in personal wealth, and has to be interpreted in the light of the changing net worth of the corporate and public sectors of the economy.