Long-Run Saving Dynamics: Evidence from Unexpected Inheritances

Arbeitspapier

We exploit inheritance episodes to provide novel causal evidence on long-run saving dynamics. For identification, we combine a panel of administrative wealth reports with the unexpected timing of sudden parental deaths. After inheritance, net worth converges towards the path established before parental death, and convergence is faster for liquid assets. Using a generalized structural framework, we show that buffer-stock and two-asset models can fit these dynamics, but only if agents are impatient enough and have both strong precautionary and post-retirement saving motives. Relative to standard calibrations, such agents have at least 50 percent higher precautionary savings for given total wealth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CEBI Working Paper Series ; No. 02/17

Classification and Topics

• Classification: Wirtschaft ; Household Saving; Personal Finance ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Macroeconomics: Consumption; Saving; Wealth ; Portfolio Choice; Investment Decisions ; Behavioral Finance: General‡
• Subject: Inheritance ; saving dynamics ; consumption ; buffer-stock ; structural ; causal ; convergence ; precautionary

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Druedahl, Jeppe ; Martinello, Alessandro
• Event: Veröffentlichung
• (who): University of Copenhagen, Department of Economics, Center for Economic Behavior and Inequality (CEBI)
• (where): Copenhagen
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/258893
• Last update: 10.03.2025, 11:43 AM CET