The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth

he purpose of this paper is to review what economists know at present about the following question: How large a portion of the existing wealth is the result of a bequest motive, that is, of accumulation for the specific purpose of leaving bequests? I will also endeavor to clarify why an answer to this question is of interest. In the early Keynesian period when the study of national saving first attracted wide interest, relatively little attention was paid to what led people to save, though it was generally understood that the main systematic reason was to leave bequests. J. M. Keynes, in the famous chapter 9 of the General Theory of Employment, Interest and Money (1936), had listed seven distinct motives for saving besides the leaving of bequests. But five of these, which include "to increase one's future income," or "to insure one's independence and power," implied that all, or nearly all, the accumulation would finally wind up as bequeathed wealth. This, in turn, meant that most private wealth originated through bequests-that is. it either had been received through bequests or was destined to be bequeathed. And, indeed, how else could society accumulate wealth? However, Keynes (1936, p. 107) also mentioned two further motives: "Precaution," that is, "to build up a reserve against unforeseen contingencies;" and "Foresight," that is, "to provide for an anticipated future relation between the income and the needs of the individual or his family different from that which exists in the present, as, for example, in relation to old age, family education, or the maintenance of dependents." These motives, in contrast to most of the previous ones, have the