Kotlikoff notes that most of U.S. wealth is due not to life cycle saving for retirement but rather to bequests and other intergenerational transfers. The process of passing wealth from one generation to the next may be explained, in large part, because of imperfect annuity arrangements.
In addition to life span uncertainty, the author points out other types of uncertainty such as uncertainty about future medical expenditures can greatly stimulate saving. Fiscal policies, such as unfunded social security, can dramatically alter a country's wealth, although the process can take many years. Unfortunately, Kotlikoff observes, official fiscal deficits are intrinsically unreliable for measuring the government's stance of fiscal policy. He also concludes that the baby busts currently underway in the United States, Europe, and Japan are likely to improve overall economic welfare despite their detrimental impacts on social security systems
Laurence J. Kotlikoff is Professor of Economics at Boston University and a Research Associate of the NationalBureau of Economic Research.
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About the Author
Laurence J. Kotlikoff, one of the nation's leading experts on fiscal policy, national saving, and personal finance and a columnist for Bloomberg, is Professor of Economics at Boston University. His writings and views appear in Forbes , the Economist , the Financial Times , the Wall Street Journa l, the New York Times , and other leading media outlets.