Aspirations, habit formation, and bequest motive

Xavier Raurich; Jaime Alonso-Carrera; Jordi Caballé

Aspirations, habit formation, and bequest motive

Xavier Raurich, Jaime Alonso-Carrera, Jordi Caballé

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Resumen

We consider an economy where individuals use their standard of living based on past consumption in order to evaluate the utility arising from current consumption. We analyse how this process of preference formation affects the bequest motive. We show that habits (based on one's own past consumption) reduce the willingness of individuals to leave bequests, while aspirations (based on the standard of living of parents) make the existence of positive bequests easier. The long-run effects of both habits and aspirations on capital stock and on the amount of bequests depend on whether or not the bequest motive is operative. © 2007 The Author(s). Journal compilation © Royal Economic Society 2007.

Idioma original	Inglés
Número de páginas	28
Estado	Publicada - jul 2004

Series de publicaciones

Nombre	CREA-Barcelona Economics
N.º	136

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https://bse.eu/research/working-papers/aspirations-habit-formation-and-bequest-motiveLicencia: C In Copyright
https://ddd.uab.cat/record/291907

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Efectes reals de la política monetària
Caballé, J. (Principal Investigator), Erosa Etchebehere, A. (Investigador/a contratado/a), Guaitoli ., D. (Investigador/a contratado/a), Raurich Puigdevall, F. X. (Investigador/a contratado/a), Rodriguez Mendizabal, H. (Investigador/a contratado/a), Jarque Ribera, X. (Investigador/a), Panadès Martí, J. (Investigador/a), Pappa , E. (Investigador/a), Petith , H. C. (Investigador/a) & Sorolla Amat, V. (Investigador/a)
Ministerio de Ciencia y Tecnología (MCYT)
10/12/03 → 19/11/06
Proyecto: Proyectos y Ayudas de Investigación

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title = "Aspirations, habit formation, and bequest motive",

abstract = "We analyze how the presence of endogenous preferences affects the altruistic bequest motive from parents to children. We will show that the existence of habits raises the threshold value of the intergenerational discount factor above which altruistic bequests are positive, while aspiration formation could push this value down. Therefore, the dynamic inefficiency of the economy with no altruism is not sufficient to prevent the bequest motive from being operative under aspiration formation. We also discuss the implications of public debt when the bequest motive is inoperative and preferences exhibit habit and aspiration formation.",

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N2 - We analyze how the presence of endogenous preferences affects the altruistic bequest motive from parents to children. We will show that the existence of habits raises the threshold value of the intergenerational discount factor above which altruistic bequests are positive, while aspiration formation could push this value down. Therefore, the dynamic inefficiency of the economy with no altruism is not sufficient to prevent the bequest motive from being operative under aspiration formation. We also discuss the implications of public debt when the bequest motive is inoperative and preferences exhibit habit and aspiration formation.

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Aspirations, habit formation, and bequest motive

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