The Contribution of Intergenerational Transfers to Total Wealth: a Reply

27 Pages Posted: 6 Jul 2004 Last revised: 1 Jul 2010

See all articles by Laurence J. Kotlikoff

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: February 1986

Abstract

This paper responds to Franco Modigliani's recent critique of our 1981 paper on the importance of intergenerational transfers for U.S. savings. Modigliani's paper is the latest salvo in a long running debate over the importance of intergenerational transfers in explaining savings behavior. While Modigliani corrects an algebraic error of minor consequences in our earlier paper, its correction does not, in our view, call into question the fundamental conclusion that life cycle considerations can account for only a small part of aggregate capital accumulation. Inevitably, it is possible to challenge aspects of any complex empirical calculation. Modigliani's attacks seem to us incorrect in most cases and generally fail to address our primary method of determining the importance of intergenerational transfers. Many considerations at least as important as those raised by Modigilani suggest that our method produces an overestimate of the importance of life cycle wealth.

Suggested Citation

Kotlikoff, Laurence J. and Summers, Lawrence H., The Contribution of Intergenerational Transfers to Total Wealth: a Reply (February 1986). NBER Working Paper No. w1827. Available at SSRN: https://ssrn.com/abstract=227165

Laurence J. Kotlikoff (Contact Author)

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National Bureau of Economic Research (NBER)

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Gaidar Institute for Economic Policy

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Lawrence H. Summers

Harvard University ( email )

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Cambridge, MA 02138
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National Bureau of Economic Research (NBER)

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United States

Harvard University - Harvard Kennedy School (HKS) ( email )

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United States

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