Cross-section data often show that the wealth of the elderly increases with age, suggesting that the life cycle hypothesis of consumption should include a bequest motive for saving. I propose a model of bequests, and a test for a bequest motive. Empirical findings are that in a ten-year panel data set, the elderly dissaved, in contradiction to most cross-section results. The test offers no support for a bequest motive.

[This paper describes an environment in which government-issued currency is dominated in rate of return and in which there obtains a Modigliani-Miller theorem for government open market operations. Earlier Modigliani-Miller theorems for government finance have been stated for environments in which government-issued currency is not dominated in rate of return in equilibrium. Since government-issued currency is widely observed to be dominated in return, it is useful to study how Modigliani-Miller theorems hinge on absence of rate of return dominance.]

Cross-section data often show that the wealth of the elderly increases with age even at advanced ages. These and other results suggest that the life-cycle hypothesis of consumption should be augmented to include a bequest motive for saving. In this paper, the author proposes a model of bequests, and a test for a bequ est motive. Using panel data, he finds that over a ten-year period the elderly in the data set dissaved, in contradiction to most cross- section results. The test offers no support for a bequest motive.