BEQUESTS AS A HEIR DISCIPLINE DEVICE

This paper develops a model of infer vivos gifts and bequests in a set ting of moral hazard and adverse selection. Altruistic parents do not perfectly know how much effort their children make to earn their livin g, nor do they know their true level of ability. Inter vivos gifts tak e place prior to the realization of the children's earnings whereas at the moment of bequests, parents do observe them. We show that an opti mal transfer policy generally uses a mix of infer vivos gifts - deemed as more efficient - and bequests - deemed as more redistributive.