Mobility, information, and bequest: The “other side” of the equal division puzzle

Abstract

There is substantial evidence that parental bequests to children are typically equal in the US—a regularity inconsistent with the predictions of standard bequest models. The prior explanation for this puzzle is parents’ desire to signal equal affection given children’s incomplete information of parental preferences. However, parents also have incomplete information regarding children preferences—which has not been considered. Using a strategic bequest framework, we show that when parents have sufficient uncertainty regarding children’s relocation returns, a separating equilibrium where parents reward attentive heirs with larger bequests is precluded. Such uncertainty appears consistent with conditions in the contemporary USA.