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Bequests as a heir “discipline device”

Abstract

This paper develops a model ofinter vivos gifts and bequests in a setting of moral hazard and adverse selection. Altruistic parents do not perfectly know how much effort their children make to earn their living, nor do they know their true level of ability.Inter vivos gifts take place prior to the realization of the children's earnings whereas at the moment of bequests, parents do observe them. We show that an optimal transfer policy generally uses a mix ofinter vivos gifts — deemed as more efficient — and bequests — deemed as more redistributive.

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We are thankful to Allessandro Cigno, Jacques Cremer, Claude d Aspremont and anonymous referees for their comments.Responsible editor: Alessandro Cigno

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Cremere, H., Pestieau, P. Bequests as a heir “discipline device”. J Popul Econ 9, 405–414 (1996). https://doi.org/10.1007/BF00573072

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  • DOI: https://doi.org/10.1007/BF00573072

JEL classifications

  • J 1
  • J 13

Key words

  • Bequests
  • inter vivos gifts
  • asymmetric information