LIFE-CYCLE AND ALTRUISTIC THEORIES OF SAVING WITH LIFETIME UNCERTAINTY

This paper examines testable implications of the life-cycle theory of saving with lifetime uncertainty. Theory suggests that persons facing lower mortality rates should exhibit greater consumption growth. Nonparametric tests, using the Retirment History Survey, provide mixed support for the theory. A parameterized model allowing for altruism provides more support. Estimates of a bequest parameter indicate that elderly households value contributions to bequests as highly as contributions to their own consumption. This is equally true for households with and without children. Such a bequest motive would curtail the impact of lifetime uncertainty on consumption growth.