Dissaving by the Elderly, Transfer Motives and Liquidity Constraints

42 Pages Posted: 4 Jan 2007 Last revised: 28 Dec 2022

See all articles by Albert Ando

Albert Ando

University of Pennsylvania and NBER (Deceased)

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF); Einaudi Institute for Economics and Finance

Daniele Terlizzese

Bank of Italy

Date Written: December 1993

Abstract

Two explanations have been proposed for the observed slowness of wealth decumulation by the elderly in the literature: the precautionary saving induced by (uninsurable) uncertainty about the time of death or by the possibility of major catastrophes in old age that require large outlays; the desire to pass part of the accumulated assets on to one's heirs. We reconsider the issue of wealth decumulation by the elderly and assess the presence of a transfer motive, drawing on Italian data. We show that if intergenerational transfer of assets takes place well before the time of death, induced for instance by existence of liquidity constraints on younger families, then tests for the presence of a transfer motive based on the relative speed of decumulation of elderly households with and without a potential bequest motive might have little discriminatory power. We suggest that in this case one should look at the whole pattern of asset accumulation and decumulation. We also offer an alternative test of the bequest motive based on life insurance purchases.

Suggested Citation

Ando, Albert and Guiso, Luigi and Guiso, Luigi and Terlizzese, Daniele, Dissaving by the Elderly, Transfer Motives and Liquidity Constraints (December 1993). NBER Working Paper No. w4569, Available at SSRN: https://ssrn.com/abstract=481487

Albert Ando

University of Pennsylvania and NBER (Deceased)

Luigi Guiso

Einaudi Institute for Economics and Finance ( email )

Via Sallustiana 62
rome, 00187
Italy

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana 62
Rome, 00187
Italy
+39 06 4792 4858 (Phone)
+39 06 4792 4872 (Fax)

HOME PAGE: http://www.eief.it/faculty-visitors/faculty-a-z/luigi-guiso/

Daniele Terlizzese (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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