How Large Are Bequest Motives? Estimates Based on Health Shocks

Abstract

I analyze the inter-vivos transfers and bequest decisions of 700,000 individuals during a period when the decision-maker receives negative news regarding life expectancy. The event that initiates the news is a health outcome. Expected mortality increases both the likelihood of transferring wealth to the next generation and the amount transferred. The size of the inter-vivos transfer and bequest are positively related to the wealth of the parent and the severity of the diagnosis--irrespective of diagnosis-specific demand for informal care. Using a structural life-cycle model, I estimate the bequest parameters that are consistent with the causal effect estimates.

JEL Classification: D1, D14, D31, E21, I12