TY  - JOUR
AU  - Abel,Andrew B.
TI  - An Analysis of Fiscal Policy Under Operative and Inoperative Bequest Motives
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2298
PY  - 1987
Y2  - June 1987
UR  - http://www.nber.org/papers/w2298
L1  - http://www.nber.org/papers/w2298.pdf
N1  - Author contact info:
Andrew B. Abel
Wharton School
University of Pennsylvania
2315 Steinberg Hall - Dietrich Hall
Philadelphia, PA  19104-6367
Tel: 215/898-4801
Fax: 215/573-7244
E-Mail: abel@wharton.upenn.edu
AB  - This paper presents a general equilibrium model with logarithmic preferences and technology. If the non-negativity constraint on bequests is strictly binding, then the bequest motive is characterized as inoperative. After determining the conditions for operative and inoperative bequest motives, the paper examines the effect of pay- as- you-go social security on the stochastic evolution of the capital stock. If the non-negativity constraint on bequests is strictly binding, then an increase in social security reduces the unconditional long- run expected capital stock. If the social security taxes and benefits are large enough, then the non-negativity constraint ceases to bind, and further increases in social security have no effect. This paper extends previous analyses by examining bequest behavior outside of the steady state and by allowing a non-degenerate cross-sectional distribution in the holding of capital.
ER  -