scholarly journals Bequest and Wealth Accumulation: Are Some Pieces of the Puzzle Missing?

1989 ◽  
Vol 3 (3) ◽  
pp. 141-152 ◽  
Author(s):  
Denis Kessler ◽  
André Masson
Keyword(s):  
Life Cycle ◽  
Precautionary Saving ◽  
Precautionary Savings ◽  
Wealth Accumulation ◽  
Main Motivation ◽  
Empirical Estimates ◽  
Inherited Wealth ◽  
Lively Debate ◽  
Aggregate Wealth ◽  
Length Of Life

The lively debate between Laurence J. Kotlikoff and Franco Modigliani presented in the Spring 1988 issue of this journal concerns an old question: what is the main motivation for saving and therefore for the accumulation of wealth? More specifically, what are the respective contributions to aggregate wealth of 1) saving for retirement (also known as “hump” saving); 2) precautionary savings (and “unintended” bequests) due to uncertainty about the length of life; and 3) planned bequests? If Modigliani's life-cycle hypothesis is to be viewed as a close to approximation of reality, then the bulk of existing wealth should have resulted from some combination of hump and precautionary saving. Our comment on this dispute attempts to advance two issues. First, the controversy involves an enormous gap between empirical estimates of the share of “inherited wealth” in total accumulation, even though the estimates are often based on the same data. We hope to clarify why the estimates vary so widely. Second, the Kotlikoff/Modigliani dispute is presented as an American issue, with little extension abroad. We will present some results from other countries that bear on the controversy.

scholarly journals Monopolistic Competition, Precautionary Savings, Coordination Failure

2020 ◽  
Author(s):  
Yuuki Maruyama
Keyword(s):  
Life Cycle ◽  
Monopolistic Competition ◽  
Demand Curve ◽  
Precautionary Saving ◽  
Precautionary Savings ◽  
Coordination Failure ◽  
Aggregate Supply ◽  
Trade Offs ◽  
Life Cycle Hypothesis

By using the concept of precautionary savings instead of the life-cycle hypothesis in a model of monopolistic competition, this paper shows that recessions can occur even when prices are flexible. In this model, when buying goods, consumers face trade-offs not only with purchasing other goods but also with saving. Producers consider this and strategically determine prices and outputs. In this case, if consumers’ precautionary saving motive increases, coordination failure occurs and the aggregate supply decreases. In simple words, this is because the demand curve shrinks to the left instead of down.

scholarly journals Intergenerational Transfers and Savings

1988 ◽  
Vol 2 (2) ◽  
pp. 41-58 ◽  
Author(s):  
Laurence J Kotlikoff
Keyword(s):  
Life Cycle ◽  
Dominant Role ◽  
Intergenerational Transfers ◽  
Policy Implications ◽  
Precautionary Savings ◽  
Wealth Accumulation ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Distribution Of Wealth ◽  
Annuity Markets

What is the main explanation for savings? Is it primarily accumulation for retirement as claimed by Albert Ando, Richard Brumberg, and Franco Modigliani in their celebrated Life Cycle Model of Savings? Is it primarily intentional accumulation for intergenerational transfers? Or is it primarily precautionary savings, much of which may be bequeathed because of imperfections in annuity markets? The answer to the savings puzzle has many policy implications and is key to understanding the distribution of wealth. A major piece of the puzzle is the quantitative importance of intergenerational transfers to the accumulation of wealth. As I will argue there is strong evidence that intergenerational transfers play a very important and perhaps dominant role in U.S. wealth accumulation. This does not mean, however, that intentional saving for gifts and bequests is the main motive for savings. Significant intergenerational transfers could also arise in the Life Cycle Model in the absence of well-functioning private annuity markets or close substitutes for such markets. In such a setting, bequests would be involuntary and potentially quite sizeable. Let us first look at the evidence on the importance of intergenerational transfers and then turn to the deeper question of why such transfers arise.

scholarly journals Life Cycle Assessment and Judgement

NanoEthics ◽  
2020 ◽  
Vol 14 (3) ◽  
pp. 271-283
Author(s):  
Christopher Nathan ◽  
Stuart Coles
Keyword(s):  
Life Cycle Assessment ◽  
Life Cycle ◽  
Academic Community ◽  
Consumer Products ◽  
Free Inquiry ◽  
Technology Project ◽  
Lively Debate ◽  
Technology Product

AbstractIt has become a standard for researchers carrying out biotechnology projects to do a life cycle assessment (LCA). This is a process for assessing the environmental impact of a technology, product or policy. Doing so is no simple matter, and in the last decades, a rich set of methodologies has developed around LCA. However, the proper methods and meanings of the process remain contested. Preceding the development of the international standard that now governs LCA, there was a lively debate in the academic community about the inclusion of ‘values’ within the process. We revisit this debate and reconsider the way forward for LCA. We set out ways in which those outside of science can provide input into LCAs by informing the value assumptions at stake. At the same time, we will emphasize that the role of those within the scientific community need not (and sometimes, will inevitably not) involve value-free inquiry. We carry out this exploration through a case study of a particular technology project that sought ways to produce industrial and consumer products from algal oils.

Life-cycle choices and risk

2018 ◽  
Author(s):  
Hans Fehr ◽  
Fabian Kindermann
Keyword(s):  
Decision Making ◽  
Life Cycle ◽  
Portfolio Choice ◽  
Labour Supply ◽  
Labour Force ◽  
Labour Productivity ◽  
Precautionary Savings ◽  
Longevity Risk ◽  
Future Earnings ◽  
Participation Decision

The optimal savings and investment decisions of households along the life cycle were a central issue in Chapter 5. There, savings decisions were made under various forms of risks.However, we restricted our analysis to three period models owing to the limitations of the numerical all-in-one solution we used. In this chapter we want to take a different approach. Applying the dynamic programming techniques learned so far allows us to separate decision-making at different stages of the life cycle into small sub-problems and therefore increase the number of periods we want to look at enormously. This enables us to take amuchmore detailed look at how life-cycle labour supply, savings, and portfolio choice decisions are made in the presence of earnings, investment, and longevity risk. Unlike in Chapter 9, the models we study here are partial equilibrium models. Hence, all prices as well as government policies are exogenous and do not react to changes in household behaviour. This chapter is split into two parts. The first part focuses on labour supply and savings decisions in the presence of labour-productivity and longevity risk. Insurance markets against these risks are missing, such that households will try to self-insure using the only savings vehicle available, a risk-free asset. This model is a quite standard workhorse model in macroeconomics and a straightforward general equilibrium extension exists, the overlapping generations model, which we study in Chapter 11. In the second part of the chapter, we slightly change our viewpoint and look upon the problem of life-cycle decision-making from a financial economics perspective. We therefore exclude laboursupply decisions, but focus on the optimal portfolio choice of households along the life cycle, when various forms of investment vehicles like bonds, stocks, annuities, and retirement accounts are available. This section is devoted to analysing consumption and savings behaviour when households face uncertainty about future earnings and the length of their life span. We study how households can use precautionary savings in a risk-free asset as a means to selfinsure against the risks they face. While in our baseline model we assume that agents always work full-time, we relax this assumption later on by considering a model with endogenous labour supply as well as a model with a labour-force participation decision of second earners within a family context.

The Economics of Consumption

2017 ◽  
Author(s):  
Tullio Jappelli ◽  
Luigi Pistaferri
Keyword(s):  
Intertemporal Choice ◽  
Theoretical Models ◽  
Precautionary Saving ◽  
Empirical Literature ◽  
Consumption Decisions ◽  
Empirical Estimates ◽  
Economic Downturns ◽  
Stabilization Policies ◽  
The Rich

Consumption decisions are crucial determinants of business cycles and growth. Knowledge of how consumers respond to the economic environment and how they react to the risks that they encounter during the life cycle is therefore crucial for evaluating stabilization policies and the effectiveness of fiscal packages implemented in response to economic downturns or financial crises. Do anticipated income changes have a different impact on consumption than unanticipated shocks? Do all consumers respond in the same way, or does the response vary by the economic circumstances and consumers’ characteristics? Do the rich increase consumption less than the poor when their income changes? In the past decades, economist have proposed many analytical perspectives, and studied these questions with a variety of data and approaches. This book attempts to guide readers through the most important theoretical papers in the field, and to evaluate theoretical models using facts or available empirical estimates. It is divided into three parts. The first seven chapters provide the basic ingredients of models with intertemporal choice, guiding the reader from a model without uncertainty to intertemporal models with precautionary saving and borrowing constraints. The central part of the book reviews recent empirical literature on the effect of income changes on consumption and on the relevance of precautionary saving. The last four chapters contain a selection of various extensions of the intertemporal model studied in the first part of the book.

ACCOUNTING FOR LIFE-CYCLE WEALTH ACCUMULATION: THE ROLE OF HOUSING INSTITUTION

2011 ◽  
Vol 16 (4) ◽  
pp. 493-517 ◽  
Author(s):  
Sang-Wook (Stanley) Cho
Keyword(s):  
Life Cycle ◽  
The United States ◽  
Mortgage Market ◽  
Wealth Accumulation ◽  
Labor Income ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Policy Experiments ◽  
Cross Country

This paper constructs a quantitative general equilibrium life-cycle model with uninsurable labor income to account for the differences in wealth accumulation and homeownership between Korea and the United States. The model incorporates different structures in the housing market in the two countries, namely, the mortgage market and the rental arrangements. The results from the calibrated model quantitatively explain some empirical findings in the aggregate and life-cycle profiles of wealth and homeownership. Quantitative policy experiments show that the mortgage market alone can account for more than 40% of the differences in the aggregate homeownership ratios. When coupled with the rental arrangements, both institutions can account for approximately 52% of the differences in the cross-country homeownership ratios.

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