Bequest motive,household portfolio choice,and wealth inequality in urban China

This paper studies the role of bequest motives in household portfolio choices and wealth inequality using a computable incomplete-market life-cycle model with precautionary saving motives, accidental bequests and voluntary bequests. Calibrating the model to match the main features of household finance in China Household Finance Survey, we quantitatively measure the effect of voluntary bequest motives on the household portfolio choices and the wealth distribution in urban China. Our results indicate the importance of bequest motives in shaping the Chinese household portfolio choices and wealth inequality, and have the policy implication on the implementation of inheritance taxes to alleviate the wealth concentration and to promote household consumption in contemporary China.