TY  - JOUR
AU  - Gokhale,Jagadeesh
AU  - Kotlikoff,Laurence J.
AU  - Sefton,James
AU  - Weale,Martin
TI  - Simulating the Transmission of Wealth Inequity via Bequests
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7183
PY  - 1999
Y2  - June 1999
UR  - http://www.nber.org/papers/w7183
L1  - http://www.nber.org/papers/w7183.pdf
N1  - Author contact info:
Jagadeesh Gokhale
Senior Fellow
CATO Institute
1000 Mass. Ave., NW
Washington, DC 20001
E-Mail: jgokhale@cato.org

Laurence J. Kotlikoff
Department of Economics
Boston University
270 Bay State Road
Boston, MA 02215
Tel: 617/353-4002
Fax: 617/353-4001
E-Mail: kotlikoff@gmail.com
AB  - This paper develops, calibrates, and simulates a dynamic 88-period OLG model to study the intergenerational transmission of U.S. wealth inequality via bequests.  The model features marriage, realistic fertility patterns, random death, assortative mating based on skills, heterogeneous skill endowments, heterogeneous rates of return, skill inheritability, progressive income taxation, and resource annuitization via social security. All bequests arise from imperfect annuitization.  Nonetheless, the model generates a realistic ration of aggregate wealth to aggregate labor income, a realistic bequest flow relative to the stock of wealth, and a realistic wealth distribution at retirement.  Skill differences, assortative mating, social security, and the time preference are the primary determinants of wealth inequality.  Bequests do propagate wealth inequality, but only in the presence of social security, which disproportionately disinherits the lifetime poor.  Intergenerational wealth immobility, also considered here, is primarily determined by the inheritance of skills from one's parents and the magnification of the impact of this inheritance by marital sorting.
ER  -