The economics of bequest patterns
Bennett, Sylvia Kathleen
Doctor of Philosophy
The manner in which an individual chooses to distribute his or her wealth upon death is a very important avenue for economic analysis. Intergenerational model builders place a great deal of importance upon bequeathing patterns to children. Primogeniture results in a much more unequal distribution of income and wealth, over the generations than equal sharing. Also, economists claim that a greater degree of wealth-splitting of larger estates is an equalizing factor (in the long run) on the distribution of wealth. Charitable bequests bring much-needed dollars into the coffers of charitable organizations. Educational and social welfare institutions are particularly with testators. Empirical research has been conducted into whether the unlimited charitable deduction has much of an effect on the amount of these bequests. This dissertation is an empirical study of the patterns of both charitable and non-charitable bequests and how these patterns are influenced by taxation, estate size and other explanatory variables, and finally the implications these patterns have for the distribution of wealth in the economy and the amount of tax revenues collected. The data base comes from probate records for 618 Harris County, Texas estates from the 1970s and the 1980s. The influence of inheritance and estate taxation on these bequests is particularly emphasized in this study. A model of testator choice is presented which shows how progressive inheritance taxation affects the bequest decision. Regression analysis is used to demonstrate that the degree of intrafamily inequality is significantly influenced by taxation. Evidence is also presented demonstrating other behavioral responses induced by "death" taxation, such as trust-forming behavior and tax avoidance practices. Price and wealth elasticities for charitable bequests are calculated using a Tobit regression procedure. The estate tax with its unlimited charitable deduction is shown to be an "efficient" way to encourage philanthropy, in the sense that, the gain to charity is greater than the loss to the treasury.