the strategic bequest motive although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation our understanding of bequest motives remains incomplete we develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries actions the model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfers we present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries

home equity commitment and long term care insurance demand abstract this paper shows how home equity may substitute for long term care insurance ltci the elderly commonly hold substantial wealth in the form of home equity that is rarely spent before death except for after moves to long term care facilities absent strong bequest motives implies that marginal utility fluctuates less across health states than one would predict based on a standard model without wealth tied up in housing numerical examples show that this asset commitment may substantially weaken ltci demand

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

new ways of looking at old issues inequality and growth abstract the paper uses new cross country data on income and asset land distribution to show that i there is a strong negative relationship between initial inequality in the asset distribution and long term growth ii inequality reduces income growth for the poor but not for the rich and iii available longitudinal data provide little support for the kuznets hypothesis policies that increase aggregate investment and facilitate acquisition of assets by the poor might thus be doubly beneficial for growth and poverty reduction

political equilibrium income distribution and growth this paper analyzes the impact of income distribution on growth when investment in human capital is the source of growth and individuals vote over the degree of redistribution in the economy the model has three main features first very different patterns of income distribution are conducive to high growth at different levels of per capita income second growth is associated with an externality whereby investment in human capital by one group increases the productivity of other groups thus potentially enabling them to invest in human capital third the initial pattern of income distribution and the resulting political equilibrium are crucial in determining whether the transmission of this externality is promoted in which case growth is enhanced or prevented in which case growth is stopped using a non overlapping generations model with voting i derive several empirical implications in particular the model implies an inverted u relation between levels of inequality and levels of income in cross sections but not necessarily in time series a result that seems consistent with a number of empirical studies

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

education democracy and growth abstract this note presents a model of endogenous growth where redistribution determined by a political equilibrium is in the form of public education it is shown that there need not be a negative relationship between growth and redistribution as public education increases the level of human capital in the conomy and at the same time tends to produce a more even income distribution

family ties and the crowding out of long term care insurance insurance for long term care ltc has developed only moderately compared to other areas of welfare which has been explained variously as the result of market failures public misconceptions of the risk of ltc needs and intergenerational contracts this paper offers a cultural explanation for the limited ltc insurance development in europe it argues that family ties by enhancing informal care giving duties inhibit individuals expected public and private insurance coverage the empirical analysis of the paper exploits cross country and sub group variability of a representative database of european union member states containing records on ltc coverage and family structure drawing upon two measures of familistic culture or family ties we find a negative association between family ties and expected coverage of ltc for different sub samples these results are robust to a set of checks for different definitions of family ties and controls and for a sub sample of first and second generation migrants policy implications suggest that widespread expansion of ltc coverage might need to accommodate existing familistic cultural norms to avoid insurance crowding out

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

are poorer states worse at targeting their poor abstract as a rule the governments of poor states provinces or countries do not seem to be very good at targeting public spending to their poor yet anti poverty programs often target poor states in the hope of reaching poor people should this change

distinguishing probability weighting from risk misperceptions in field data abstract we outline a strategy for distinguishing rank dependent probability weighting from systematic risk misperceptions in field data our strategy relies on singling out a field environment with two key properties i the objects of choice are money lotteries with more than two outcomes and ii the ranking of outcomes differs across lotteries we first present an abstract model of risky choice that elucidates the identification problem and our strategy the model has numerous applications including insurance choices and gambling we then consider the application of insurance deductible choices and illustrate our strategy using simulated data

the rational nonpurchase of long term care insurance only a tiny fraction of the nonpoor population currently purchases private insurance coverage against long term care ltc costs studies generally attribute the failure to purchase private coverage to unawareness by potential purchasers of the benefits of coverage and a misperception that medicare currently covers long term care i explore alternative reasons for failure to purchase coverage by well informed expected utility maximizing risk averse individuals for whom ltc is associated with a large increase in mortality and for whom family members represent an alternative source of care there may be no demand for ltc insurance even if it is made available at actuarially fair premiums because the main consequence of coverage is to enhance the expected value of one s estate

savings of the elderly and desired bequests cross section data often show that the wealth of the elderly increases with age even at advanced ages these and other results suggest that the life cycle hypothesis of consumption should be augmented to include a bequest motive for saving in this paper the author proposes a model of bequests and a test for a bequ est motive using panel data he finds that over a ten year period the elderly in the data set dissaved in contradiction to most cross section results the test offers no support for a bequest motive copyright 1987 by american economic association

regional inequalities economic growth and liberalisation a study of the indian economy in this article we examine the pattern of regional inequalities in india during 1970 92 trend analysis shows that inter state inequality is rising in india in almost every sphere of economic activity particularly in the unorganised industry

impact of natural disasters on income inequality in sri lanka abstract we explore the relationship between natural disasters and income inequality in sri lanka as the first study of this nature for the country the analysis uses a unique panel data set constructed for the purpose of this paper it contains district inequality measures based on household income reported in six waves of the household income and expenditure survey of sri lanka during the period between 1990 and 2013 data on disaster affected population and other economic and social indicators employing a panel fixed effects estimator we find that contemporaneous natural disasters and their immediate lags significantly and substantially decrease inequality in per adult equivalent household income as measured by the theil index findings are robust across various inequality metrics sub samples and alternative estimators such as ordinary least squares and system gmm however natural disasters do not affect household expenditure inequality either households behave as if they have a permanent income or all households reduce their expenditure proportionately irrespective of their income level in responding to natural disasters natural disasters decrease non seasonal agricultural and non agricultural income inequality but increase seasonal agricultural income inequality income of richer households is mainly derived from non agricultural sources such as manufacturing and business activities and non seasonal agricultural activities poorer households have a higher share of agricultural income

why have some indian states done better than others at reducing rural poverty the unevenness of the rise in rural living standards in the various states of india since the 1950s allowed the authors to study the causes of poverty they modeled the evolution of average consumption and various poverty measures using pooled state level data for 1957 91 they found that poverty was reduced by higher agricultural yields above trend growth in nonfarm output and lower inflation rates but these factors only partly explain relative success and failure in reducing poverty initial conditions also mattered states that started the period with better infrastructure and human resources with more intense irrigation greater literacy and lower infant mortality rates had significantly greater long term rates of consumption growth and poverty reduction by and large the same variables that promoted growth in average consumption also helped reduce poverty the effects on poverty measures were partly redistributive in nature after controlling for inflation the authors found that some of the factors that helped reduce absolute poverty also improved distribution and none of the factors that reduced absolute poverty had adverse impacts on distribution in other words there was no sign of tradeoffs between growth and pro poor distribution

relationships between household consumption and inequality in the indian states current evidence on the relationships between growth and inequality is predominantly based on cross country data sets or panel data sets covering a small number of time periods but these relationships being fundamentally dynamic in nature need to be considered over a much longer time horizon available state level results from the national sample surveys in india provide such an opportunity this article uses this unique data set to examine the interrelationships between average consumption and inequality within states and test for causality distributional patterns of growth vary but there is strong evidence in many instances of a strong negative effect of initial inequality on subsequent growth

the kuznets process and the inequality development relationship abstract in his classic paper on economic growth and income inequality kuznets discussed the process of population shift from traditional to modern activities as the basis for a theory of distributional change during the course of development in this paper we present a formalization of the kuznets process conduct a general analysis of distributional change under this process and derive the functional forms of and conditions for a turning point in the inequality development relationship for six commonly used indices of inequality the functional form appropriate to each index is then estimated using cross section data on 60 developing and developed countries finally some extensions to the initial formalization of the kuznets process are considered

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on