Journal of Economic Perspectives: Vol. 3 No. 3 (Summer 1989)


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

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Kessler, Denis, and Andre Masson. 1989. "Bequest and Wealth Accumulation: Are Some Pieces of the Puzzle Missing?" Journal of Economic Perspectives, 3(3): 141-152.

DOI: 10.1257/jep.3.3.141


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.

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Kessler, Denis (U Nancy)
Masson, Andre (CNRS)

JEL Classifications

023: Macroeconomics--Theory of Aggregate Demand: Consumption
224: National Wealth and Balance Sheets
023: Macroeconomics of Intertemporal Choice
024: Welfare Theory--Redistribution Analyses


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