This paper presents a model in which a country's measured average propensity to save endogenously rises when its economy industrializes. The model has agricultural and manufacturing sectors. Only agriculture uses land. If at early dates income per capita is low, agricultural consumption is important, land is valuable, and capital gains on land may constitute most wealth accumulation, leaving the country's NIPA APS low. If exogenous technological progress raises incomes over time, Engel's law shifts demand to manufactured goods. Then land's portfolio importance relative to reproducible capital diminishes and the national income and products account saving rate can rise.

This paper develops a model of private savings behavior in which households care about their descendants, cannot have negative net worth, and have lifetime earnings depending on random draws from an exogenous distribution of abilities. The elements interact: very lucky parents are likely to leave large estates; constrained children are unusually likely to receive intergenerational transfers. The paper proves the existence of a stationary cross-sectional distribution of wealth, endogenously determines where liquidity constraints will bind, and shows that the long-term interest rate must be such that Ricardian neutrality fails. Its last section generates several illustrative numerical simulations.

Tobin's average q has usually been well above 1, but fell below 1 during 1974-1984. Our model explains this pattern and reconciles it with unchanging aggregate investment. The stock market value in the numerator of q reflects ownership of physical capital and knowledge, but the denominator measures just physical capital. Therefore, q is usually above 1. Periodic arrivals of important new technologies, such as the microprocessor in the 1970's, suddenly render old knowledge and capital obsolete, causing the stock market to drop. National accounts measures of physical capital miss this rapid obsolescence. Then q appears to drop below 1. (JEL E44, O3, O41)

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper reviews four well-known theoretical models of private bequest behavior, notes their di¤ering implications for public policy, and discusses a way of empirically discriminating among them. Then it implements the test with micro data from Sweden (LLS) and the U.S. (PSID). The so-called altruistic (or dynastic) model, which, among the four models, has perhaps the most wide-ranging implications for policy, receives some, though limited, support in the LLS, but not the PSID. The inter-country di¤erence is statistically signi…cant. There is evidence of a potential complication due to a dependence of children's education on parents …nancial status in the case of the U.S. Terms of use: Documents in EconStor may

No abstract

Using pseudo-panel data, we estimate the structural parameters of a life-cycle consumption model with discrete labor supply choice. A focus of our analysis is the abrupt drop in consumption upon retirement for a typical household. The literature sometimes refers to the drop, which in the U.S. Consumer Expenditure Survey we estimate to be approximately 16%, as the "retirement-consumption puzzle." Although a downward step in consumption at retirement contradicts predictions from life-cycle models with additively separable consumption and leisure, or with continuous work-hour options, a consumption jump is consistent with a setup having nonseparable preferences over consumption and leisure and requiring discrete work choices. This paper specifies a life-cycle model with these latter two elements, and it uses the empirical magnitude of the drop in consumption at retirement to provide an advantageous method of identifying structural parameters-most importantly, the intertemporal elasticity of substitution.

This paper proposes and analyzes a Social Security reform in which individuals no longer face the OASI payroll tax after, say, age 54 or a career of 34 years, and their subsequent earnings have no bearing on their benefits. We first estimate parameters of a life–cycle model. Our specification includes non-separable preferences and possible disability. It predicts a consumption–expenditure change at retirement. We use the magnitude of the expenditure change, together with households’ retirement–age decisions, to identify key structural parameters. The estimated magnitude of the change in consumption–expenditure depends importantly on the treatment of consumption by adult children of the household. Simulations indicate that the reform could increase retirement ages one year or more, equivalent variations could average more than $4,000 per household, and income tax revenues per household could increase by more than $14,000.

This paper analyses the very long run, or "stationary state," impact of an unfunded social security system. We use an overlapping generations model framework. A key feature is that while parents care about their children and can leave non-negative bequests to them, children also care about their parents and can make non-negative "gifts" to them. We show that the possibility of negative "net bequests" may make social security less harmful to private wealth accumulation than would otherwise be the case. A subsidiary finding is that risk-loving behaviour may emerge for some households due to the nature of intergenerational transfers within family lines.