Capital Accumulation in a Bequest Economy

01/08/1995 |  Strawczynski Michel


​An augmented life cycle model is used in order to characterize capital accumulation in an overlapping generations

economy with altruistic agents. Precautionary savings serve as an instrument to face two different types of idiosyncratic

income uncertainty: (i) individual's income uncertainty in the future and (ii) future generation's income uncertainty.

By performing a calibrated simulation of the model, it is shown that precautionary savings aimed at providing bequests

can account for a vast portion of capital accumulation. Empirical evidence on income uncertainty calls for further tests

on the impact of future generation's income uncertainty on precautionary savings.

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