This paper studies the impact of an unfunded social security
system on the distribution of bequests in a framework where
savings are due both by life cycle and by random altruistic
motivations. We show that the impact of social security on
the distribution of bequests depends crucially on the
importance of the bequest motive in explaining savings
behavior. If the bequest motive is strong, then an increase
in the social security tax raises the bequests left by
altruistic parents. On the other ...
This paper studies the impact of an unfunded social security
system on the distribution of bequests in a framework where
savings are due both by life cycle and by random altruistic
motivations. We show that the impact of social security on
the distribution of bequests depends crucially on the
importance of the bequest motive in explaining savings
behavior. If the bequest motive is strong, then an increase
in the social security tax raises the bequests left by
altruistic parents. On the other hand, when the importance
of bequests in motivating savings is sufficiently low, the
increase in the social security tax could result in a reduction
of the bequests left by altruistic parents under some
conditions on the attitude of individuals toward risk and on
the relative returns associated with private saving and social
security. Some implications concerning the transitional effects
of introducing an unfunded social security scheme are also discussed.
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