Leaving Bequests: By Accident or by Design?

The life-cycle model of consumption is the standard model for the analysis of consumption and saving over the life cycle.¹ The model specifies that people save during their working lives, and then consume their savings in retirement. The claim that a large fraction of household wealth is the result of inheritances has stimulated substantial interest in a bequest motive for saving. While large bequests are not necessarily at odds with simple life-cycle saving, they could also indicate that people are actively saving in order to make such transfers.