Search Results (22)

Motivated by the Generation-Skipping Transfer Tax (GSTT) in the United States, we examine how varying estate tax rates by the heir’s age affects welfare. Methodologically, we introduce a parsimonious constant elasticity of substitution (CES) bequest utility that is markedly more tractable than the altruistic specifications commonly used in the literature, delivering closed-form optimal rules and transparent parameterization. Using this new framework, we provide a proof of concept showing how transfers from older to younger generations can enhance equilibrium welfare in a dynamically efficient economy à la Samuelson (1975). We embed the tractable bequest utility in a two-period overlapping-generations model with age-dependent estate tax schedules. Numerical exercises—parameterized to the fact that estate tax revenue is small relative to labor income taxation—indicate that lowering the tax rate on bequests to younger heirs (grandchildren) relative to older heirs (adult children) raises the present value of lifetime resources and overall welfare, effectively reversing the logic of the current GSTT. The findings highlight a practical avenue for implementing a “reverse social security” transfer from old to young that can improve welfare in dynamically efficient economies. Full article

Estate recovery is a policy whereby the state recovers public long-term care (LTC) benefits from the estates of deceased beneficiaries. Using data from a Swiss survey, this study examines which individuals are most responsive to estate recovery in their decisions to purchase LTC insurance and provide informal care. Generalized linear models with a binomial logit specification assess the role of bequest motives, concern about future dependence, beliefs about financial responsibility, and demographic factors. Results show the important role of the bequest motive in shaping the impact of estate recovery on informal care decisions, but not on LTC insurance decisions. In contrast, concerns about future dependence influence both types of decisions. Younger individuals and those who believe that financing LTC is a citizen’s responsibility are more sensitive to estate recovery when purchasing LTC insurance. Conversely, individuals who feel legally obligated to help their dependent parents or who provide assistance due to high professional care costs are more likely to report estate recovery as a relevant factor in caregiving decisions. These findings provide valuable information for more targeted LTC policy design by identifying individuals most responsive to estate recovery in their decisions to purchase LTC insurance and provide informal care. Full article

In developed countries such as Spain, where the population is increasingly aging, retirement planning and longevity risk represent major societal challenges. In Spain, in particular, a significant proportion of household wealth is concentrated in real estate, primarily in the form of owner-occupied housing. For this reason, one emerging financial product in the retirement savings space is the reverse mortgage (RM). This study examines the determinants of acceptance of this financial product using survey data collected from Spanish individuals. The intention to take out an RM is explained through performance expectancy (PE), effort expectancy (EE), social influence (SI), bequest motive (BM), financial literacy (FL), and risk (RK). The analysis applies machine learning techniques: decision tree regression is used to visualize variable interactions that lead to acceptance; random forest to improve predictive capability; and Shapley Additive Explanations (SHAP) to estimate the relative importance of predictors. Finally, Importance–Performance Map Analysis (IPMA) is employed to identify the variables that merit greater attention in the acceptance of RMs. SHAP values indicate that PE and SI are the most influential predictors of intention to use RMs, followed by BM and EE with moderate importance, whereas the positive influence of RK and FL is more reduced. The IPMA highlights PE and SI as the most strategic drivers, and RK and BM act as relevant barriers to the widespread adoption of RMs. Full article

This paper explores optimal consumption and investment strategies for agents facing mortality risk within a complete financial market. Departing from traditional frameworks, we leverage state-dependent utility theory, discounted by the state–price process, to compare consumption streams and utilize life insurance as a strategic hedging instrument. To model the ability of insurance companies to hedge the mortality risk of consumer pools, we introduce the concept of life insurance completeness, allowing individuals to achieve optimal consumption even in scenarios involving negative wealth. Our model relaxes the stringent integrability conditions commonly imposed in the literature, offering a more economically grounded approach to valuation and hedging. We derive a general solution to the optimization problem using martingale techniques under minimal assumptions, demonstrating that life insurance primarily serves as a mortality risk hedge rather than a bequest motive. This perspective resolves longstanding theoretical and empirical challenges, notably the annuity puzzle, by illustrating that optimal consumption and investment, in the absence of labor income, do not necessitate annuities or other life insurance policies. Our key contributions include (1) extending valuation frameworks to encompass prepaid insurance and less restrictive integrability criteria, (2) establishing life insurance completeness for effective mortality risk hedging, (3) demonstrating the feasibility of optimal consumption under negative wealth and state-dependent preferences, and (4) offering a resolution to the annuity puzzle that aligns with empirical observations. Full article

Researchers, policy- and decision-makers, and planners have historically focused on the monetary value of parks and green spaces (either as costs or potential sale value). In this article, we argue that researchers, practitioners, and policymakers need to consider and investigate the non-economic values of parks and green spaces to more fully understand the worth of these spaces. We apply the total economic value framework (TEVF) to parks and green spaces in Kalamazoo, Michigan, to assess how use values and non-use values shape how people value local green spaces. This methodology provides a more comprehensive value of park spaces beyond the economic value which, in most cases, undervalues natural spaces. Our research indicates that, in the case of Kalamazoo, Michigan, parks and green spaces are worth more than the monetary value of their property to people. Non-use, existence, and bequest values all load strongly in our analysis, and these results indicate that people in the Kalamazoo area believe the worth of their park spaces extends well beyond the purely economic realm. We further argue that TEVF is an effective tool for park managers to incorporate diverse value systems and perceptions to quantify the importance of these values. Full article

This paper introduces an innovative sell-type home reversion product aimed at monetizing Singapore’s public flats, serving as a new alternative to the existing Singapore Lease Buyback Scheme (LBS). This new product not only retains the LBS’s guaranteed period of residence in the property along with life annuity incomes but also enhances the product features to meet specific homeowner needs, including the ability to age in place, flexibility in retaining part of the property, options for bequests, and guaranteed principal return. By incorporating these additional features, the new product seeks to stimulate greater demand for monetizing public flats among asset-rich but cash-poor homeowners. An actuarial pricing model is developed to establish a transparent and fair framework for justifying the cost of each product feature. Additionally, we present a cost–benefit analysis from both the provider and consumer perspectives to highlight the major contributions of the new product when compared to the LBS. Full article

Family considerations are known to influence the decision to buy long-term care (LTC) insurance. This paper uses a Swiss survey to identify the characteristics of individuals willing to purchase LTC insurance, either to protect their children’s bequest or because they cannot rely on family for care. First, it shows that the presence or absence of children plays an important role in the two motivations for buying LTC insurance. Second, it shows that individuals from the French-speaking part of Switzerland and those with lower self-perceived health are more likely to buy LTC insurance because of the unreliability of family care. On the other hand, individuals with higher self-perceived health and those with a right and center political orientation are more likely to buy LTC insurance for reasons of bequest protection. The results provide insights into designing more targeted strategies to promote LTC insurance. Full article

This research uses representative survey data to elicit the annuitisation preferences of members of the Slovak-funded private pension pillar. The research explores the impact of socioeconomic and sociodemographic variables, as well as some exogenous factors on annuity choices. The following choices are analysed: (i) taking an annuity upon retirement; (ii) delaying the uptake of an annuity and accumulating savings beyond the official age of retirement; and (iii) leaving accumulated wealth to heirs (bequest motive). The paper provides some original contributions. Firstly, it relates annuity choices to intrafamily risk sharing. Attention is paid to household structure, income levels, and the presence of dependent children. Secondly, the importance of diverse information resources on the formation of annuity preferences is examined. We found that professional advice provided by financial institutions and government bodies was associated with higher probabilities of annuity uptake. A disproportional reliance on informal channels may explain the higher preference towards bequest motives in rural areas. Thirdly, annuity choices are studied in relation to alternative sources of income in old age. A combination of social security pensions and bequest-sharing arrangements may offset the need for the annuitisation of pension wealth. Full article

Many people find it difficult to start and maintain a retirement savings plan. We show how nudges can be used both to encourage people to save enough to provide an acceptable standard of living in retirement and to draw down their accumulated pension fund to maximize retirement spending, without the risk of either running out of money or leaving unintended bequests. Networks can help too, particularly employer-based networks. However, the nudges and networks are more likely to be effective if they have legislative backing and support. Full article

Post retirement, annuities provide a steady stream of income for retirees. However, the annuitization rate is relatively small in the insurance market in many countries around the world. Prior studies have shown that a substandard health status in retirement reduces annuitization due to adverse selection. Recent innovation introduces an enhanced annuity plan where individuals with impaired health are entitled to higher annuity payments. However, this market is less explored in countries other than the UK. This paper aims to study the optimal annuitization rate where both standard and substandard annuity rates are offered in the market. The life cycle model in this paper incorporates multiple health states based on the likelihood of events and quality of life measures. Our framework consists of two important parts. First, we estimate the transition probabilities of all health states in our Markov model using reliable national data. Second, we derive the optimal consumption and annuitization solution to maximize a retiree’s expected lifetime utility given the uncertainty of future health risk. In addition, we also consider the bequest motive in our optimization problem. Our results show that the optimal annuitization is driven by the choice of bequest and risk-aversion parameters, as well as the health status of the annuitant. Whilst the health-dependent utility parameter only affects our results for certain cases. Full article

This paper discusses the contribution of individuals and their effects on the protection and management of archaeological sites found in the British colonies at the beginning of the 19th Century. Despite all these contributions, the most important bequest is the formation of comprehensive legislation on cultural properties that are still applicable and considered essential to the historic, standing, or ruined, monuments located in Pakistan. It should be noted that Pakistan’s heritage laws are uniformly applicable to all kinds of architectural heritage, archaeological sites, and monuments, irrespective of their nature, state, and classification. This contrasts with the lack of updates and amendments of rules and guidelines for the preservation of heritage sites and monuments across the country from further damages. The paper focuses on the current architectural and heritage management rules and policies of Pakistan, which are based on the British colonial legacy with some (partial) changes introduced since Pakistan’s independence in 1947. Finally, the paper emphasizes the need for the development of advanced management policies and proposed heritage management rules for the preservation of heritage constructions, archaeological sites, and architectural monuments to establish the link between the present and past to remain for future generations. Full article

Mountain lakes are highly sensitive to global change, requiring sustainable management strategies that support crucial ecosystem services (ES). However, small mountain lakes are rarely in the focus of ES assessments, and indicators are potentially lacking. Therefore, this study aimed at comprehensively assessing key ES of 15 study lakes located in two regions in the European Alps. We involved local stakeholders and experts to identify important ES. We quantified eight ES in non-monetary terms, using 29 indicators based on limnological, spatial and socio-economic data. Finally, we evaluated ES in relation to the socio-ecological context of the study lakes. The most important ES included surface water for non-drinking purposes, maintaining populations and habitats, outdoor recreation, aesthetic value, entertainment and representation, scientific research, education as well as existence, option, or bequest value. Quantitative results indicate varying levels of ES across the study lakes. Based on 12 different socio-ecological variables, we identified four groups of lakes differing also in five ES. Maintaining populations and habitats, aesthetic value as well as existence, option or bequest value were rather independent from the socio-ecological context. Our findings contribute to a deeper understanding of ES of mountain lakes, also supporting the development of sustainable management strategies in mountain regions. Full article

For the past decade, Important Agricultural Heritage Systems (IAHSs) have become research hotspots because of their rapidly increasing number. The non-use value is an important part of the value of an IAHS, and if ignored, the total value of an IAHS may be underestimated in part. Litchi is native to southern China, and its farming system is an important agricultural heritage with Chinese characteristics and global influence. In this context, the present study attempts to investigate the willingness to pay (WTP) of local residents and assess the non-use value of the Lingnan Litchi Cultivation System (Zengcheng) in Guangdong, China. To this aim, a survey was implemented on four sites in Zengcheng with the application of the contingent valuation method (CVM). Based on the analysis of 458 questionnaires, the WTP rate of residents in the heritage site is 66.6%, and the mean WTP is 62.5 Chinese yuan (CNY) per year. The total non-use value of the Lingnan Litchi Cultivation System (Zengcheng) is 49.9 million CNY. The option, bequest, and existence values in 2018 are estimated to be 20.1, 13.7, and 16.1 million CNY, respectively. Results of the logistic regression analysis indicate that variables of age, education level, financial burden, and heritage value cognition are significant factors of WTP for protecting litchi heritage. Compared with similar studies in China, the mean WTP and positive payment rate in this study are at a medium level. Resource attributes and local cultures may have significant impacts on the composition and estimate of the non-use value of an IAHS. The results of this study can be beneficial to the dynamic conservation and adaptive management of IAHSs. Full article

This paper investigates how the deteriorating health status of an individual affects the marginal utility of non-medical consumption in China. By using 2011, 2013 and 2015 China Health and Retirement Longitudinal Study (CHARLS) data, we find that when the number of chronic diseases increases one standard deviation, the marginal utility of consumption will increase by 16.0% and 20.0% for samples of the middle-aged and elderly individuals over 50 and 65 years of age, respectively. This result is to some extent contrary to the findings from the US. Different economic development stages, intergenerational norms and bequest motives may be reasons for these contrasting patterns between China and the US. Full article

Forest-based ecosystem services (ES) play a vital role in improving people’s livelihoods, the environment, and the economy. Prior studies have focused on technical aspects of economic valuation such as biophysical quantification through modeling and mapping, or monetary valuation, while little attention has been paid to the social dimensions. Taking case studies of two dominant community-based forest management systems (community forestry—CF and collaborative forestry—CFM) in the Chure region of Nepal, we investigate how local users and other stakeholders perceive the valuation of forest-based ecosystem services based on proximity (nearby vs. distant users), socio-economic class (rich vs. poor users), and forest management modalities (CF vs. CFM). We found that local users and other stakeholders in the Chure region identified a total of 42 forest-based ecosystem services: 16 provisioning, 15 regulating, and 11 cultural services. While all local users prioritised firewood, water quality improvement, and bequest values as the top three services, genetic resources, hazard protection, and hunting services were valued as having the lowest priority. The priorities placed on other services varied in many respects. For instance, rich users living near a CF showed a strong preference for fodder, grasses, and soil conservation services whereas users living far from forests prioritised timber, fresh water, and flood control services. In the case of CFM, rich users adjacent to forests preferred timber, soil conservation, and carbon sequestration services but those living far from forests chose timber, poles, and flood control as their top priorities. Differences in rankings also occurred among the regional managers, national experts, and forest users. The reasons for these differences and their policy implications are discussed, and ways of reaching consensus between the users are suggested. Full article