Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 1999:1: Post Mortem Reputation, Compensatory Gifts and Equal Bequests

Michael Lundholm () and Henry Ohlsson
Additional contact information
Michael Lundholm: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
Henry Ohlsson: Department of Economics Uppsala University, Postal: Department of Economics, Uppsala University, Box 256, S-751 05 Uppsala, Sweden

Abstract: The empirical evidence suggests that parents use inter vivos gifts (i.e., transfers of tangible and financial property) to compensate less well off children whereas post mortem bequests are divided equally among siblings. We study a theoretical model assuming, first, that the amounts given is private information, only known to the donor ant the donee, while the amounts bequeathed is public information. Second, we assume that parents care about the reputation that their bequest behavior will leave them after their death. More specifically, this reputation is deteriorating in the difference in amounts inherited. We show that, given these assumptions, the optimal choice of altruistic parents is compensatory gifts and equal bequests.

Keywords: Altruism; bequests; inheritance; gifts; equal division; post mortem reputation; social norm; information.

JEL-codes: D10; D31; D63; D64

5 pages, September 10, 1999

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