Uncertain survival and time discounting: Intertemporal consumption plans for family trusts

Satchell, S; Thorp, SJ

Uncertain survival and time discounting: Intertemporal consumption plans for family trusts

Satchell, S Thorp, SJ

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Publisher:: Springer
Publication Type:: Journal Article
Citation:: Journal of Population Economics, 2011, 24 (1), pp. 239 - 266
Issue Date:: 2011-01

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Field	Value	Language
dc.contributor.author	Satchell, S	en_US
dc.contributor.author	Thorp, SJ	en_US
dc.date.issued	2011-01	en_US
dc.identifier.citation	Journal of Population Economics, 2011, 24 (1), pp. 239 - 266	en_US
dc.identifier.issn	0933-1433	en_US
dc.identifier.uri	http://hdl.handle.net/10453/17486
dc.description.abstract	We derive expressions for optimal consumption for family trusts with random wealth and uncertain survival. Using UK birth statistics and the theory of branching processes, we compute size and survival probabilities for single- and multiple-branch families. Survival for a single-branch family is approximated by a Pareto distribution and consumption policies exhibit decreasing discount rates, but multiple-branch families use non-monotonic discount rates. When trust distributions depend on the number of beneficiaries rather than the survival of the whole family unit, spending paths depend on expected membership and the elasticity of intertemporal substitution. We report examples of consumption paths for a range of family trusts with constant relative risk aversion preferences.	en_US
dc.publisher	Springer	en_US
dc.relation.ispartof	Journal of Population Economics	en_US
dc.relation.isbasedon	10.1007/s00148-009-0297-9	en_US
dc.rights	This is a post-peer-review, pre-copyedit version of an article published in Journal of Population Economics. The final authenticated version is available online at: https://dx.doi.org/10.1007/s00148-009-0297-9.	en_US
dc.subject.classification	Economics	en_US
dc.title	Uncertain survival and time discounting: Intertemporal consumption plans for family trusts	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	24	en_US
utslib.for	140207 Financial Economics	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1603 Demography	en_US
utslib.for	1606 Political Science	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Strength - CENSOC - Study of Choice
utslib.copyright.status	open_access
pubs.consider-herdc	true	en_US
pubs.issue	1	en_US
pubs.volume	24	en_US

Abstract:

We derive expressions for optimal consumption for family trusts with random wealth and uncertain survival. Using UK birth statistics and the theory of branching processes, we compute size and survival probabilities for single- and multiple-branch families. Survival for a single-branch family is approximated by a Pareto distribution and consumption policies exhibit decreasing discount rates, but multiple-branch families use non-monotonic discount rates. When trust distributions depend on the number of beneficiaries rather than the survival of the whole family unit, spending paths depend on expected membership and the elasticity of intertemporal substitution. We report examples of consumption paths for a range of family trusts with constant relative risk aversion preferences.

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http://hdl.handle.net/10453/17486