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.

Under the assumption that unemployment is the result of job rationing, Hicks's compensating variation measures the payment that would make a worker indifferent between employment at his desired annual hours and rationed employment. This theory is applied at the individual level to find the compensation for the rationing. It varies according to the position of the compensated labor supply function, the wage rate, and the duration of unemployment. The individual measures are aggregated for each year from 1967 through 1975. The aggregate measure varies sharply with the level of unemployment; but it is small when compared with more conventional measures such as the difference between actual GNP and potential GNP.

A lifetime utility model, in which the date of death is uncertain and in which bequests give utility, is analyzed and estimated. The parameter estimates imply that most bequests are accidental, the result of mortality risk, and that the shape of the desired consumption path is sensitive to variations in mortality rates. On average, the elderly in the sample dissave, which is consistent with a life-cycle model in which utility does not depend on bequests. Copyright 1989 by The Econometric Society.

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. Copyright 1987 by American Economic Association.

DESPITE the importance of wage rates in our understanding of economic activity, there are almost no wage data available appropriate for studying changes in the wages received by different race, sex, age, and education groups in the labor force. The only official data on hourly wages, those published in Employment and Earnings, are disaggregated by industry, but not by the personal characteristics of the wage-earners. Data on annual incomes and earnings by personal characteristics are available from the Current Population Survey, but they are not suitable for the calculation of hourly wage rates. As a result of this substantial defect in the wage statistics of the Federal Government, the recent controversy about the changes in the last decade in the relative economic well-being of blacks and whites was carried out in the absence of any information about changes in their wage rates. This study uses the 1967 Survey of Economic Opportunity (SEO), a new source of data, and the 1960 Census 1/1000 Sample in a comparison of wage rates in 1959 and 1967. Estimates of wages of individuals in 1959 are obtained by making use of additional data which were unavailable to previous investigators.' Using 1967 wage rates, recorded directly in the SEO, and the improved estimates of 1959 wage rates, average wages by race and sex are found in each of the two years. The variation of individual wages by characteristics such as age, race, sex and education is then estimated in both years, so that changes in wages can be calculated when hours worked by age, race, sex and education are held constant. This gives Laspeyres and Paasche indices of wage rates. In the final part of the paper, the structure of wage rates by personal characteristics in each of the years is studied. We found that average wage rates of blacks increased considerably more than those of whites between 1959 and 1967. Part of the increase of blacks' wages can be attributed to changes in the composition of the labor force, (mainly to an increase in average education). Even when the 1959 composition is used to calculate 1967 wages, so that changes in the level of education are eliminated, blacks had substantially greater increases in wages than whites. The average wage of blacks was still much lower than that of whites in 1967. Wages differentials by education were almost the same in both years, especially for whites. Wages of older workers declined relative to those of prime-aged workers. There was no consistent pattern in the changes of wages of young workers relative to wages of 35-44-yearold workers: young white females had higher relative wages; young white males had almost the same relative wages; young black females had generally higher relative wages; wages of black males aged 18-24 increased but wages of black males aged 16-17 decreased relative to wages of prime-aged black males. In both periods wages were, in general, lower in the South and higher in the West than in the rest of the country. Relative wages in the South and West increased during the period, so that by 1967 wages in the West were substantially higher than the average nationwide wage rates.

We analyze detailed longitudinal data on a cohort of males aged 58–67 in 1969–1973, a period of substantial increases in real Social Security benefits. We find the following: (1) the accelerating decline in labor force participation of elderly men in 1969–1973 can be explained by the large increase in real Social Security benefits; (2) there is evidence of a liquidity constraint effect for an important subgroup of the elderly; (3) the magnitude of this induced retirement effect is large enough that ignoring it can lead to serious underestimation of the fiscal implications of changes in benefit provisions. Our results are interpreted in the historical context of a particular cohort undergoing major, unanticipated transfers of wealth; the steady-state effects of Social Security on retirement may not be the same.

The recent White House Conference on Aging graphically demonstrated public concern over the welfare of the growing elderly segment of the U.S. population. How is this group faring economically? Have they suffered from the stagflation of the last decade, or have they been sheltered from economic harm by a combination of government programs and fortuitous asset holdings? How vulnerable were they as a group to the inflation of the 1970's? We answer some of these questions by focusing on the economic welfare of the elderly over the last decade. We assess the level and composition of real income and wealth of the elderly; we compare their incomes to those of the general population; and we compute a measure of their vulnerability to unexpected increases in the price level. We note, however, that there are many other important indicators of the welfare of the elderly, such as the increasing life expectancy, changing living arrangements and housing, trends towards earlier retirement, and decreasing intergenerational contact. We do not consider these issues, so our results do not give a complete assessment of the welfare of the elderly. We believe our results provide a good assessment of how their economic position changed over the decade.

Becker's theory of home production suggests substitutability between consumption spending and home production. Using panel data with detailed information on spending and time use, we analyze house-holds' ability to replace consumption spending by home produced counterparts. Keeping wages fixed and changing lifetime resources by the shock to housing wealth during the Great Recession we estimate an elasticity of substitution that is consistent with a Life-Cycle Becker model. However, we estimate that only about 11% of total spending is replaceable by home production, which, in contrast to prior literature, makes it unlikely that home production fully mitigates the consequences of wealth shocks to well-being.