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THE IMPACT OF BEQUESTS ON LIFETIME WEALTH ACCUMULATION: AN ECONOMETRIC STUDY OF TWO GENERATIONS OF RURAL HOUSEHOLDS IN INDIA
Author(s) -
Deolalikar Anil B.,
Singh R. P.
Publication year - 1990
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.1990.tb00319.x
Subject(s) - bequest , economics , demographic economics , labour economics , overlapping generations model , inheritance (genetic algorithm) , biology , biochemistry , political science , law , gene
Using retrospective data on bequest receipts and wealth over two generations of rural Indian households, we have estimated the effect of bequest receipts on the lifetime wealth accumulation of recipients. We exploit the availability of data on two generations of the same household by estimating a family fixed effects model that controls for unobserved, intergenerationally‐persistent household endowments. Our results suggest an adverse impact of bequest receipts on the wealth accumulation of recipients. This effect is much more negative for the current generation of household heads than for the previous generation, indicating that the disincentive effects associated with bequest receipts have increased substantially over a generation. Such disincentive effects are consistent with the commonly‐observed phenomenon of “regression to the mean.” The empirical results also show that the positive association between schooling and wealth accumulation has strengthened substantially over the course of a generation, implying rising returns to schooling.