On the Accumulation of Wealth under Aspirations


We analyze the effects of the introduction of aspirations both on the pattern of wealth accumulation along the life cycle of individuals displaying a "joy-of-giving" motive for bequests and on the evolution of wealth within a dynasty. We will show that the introduction of aspirations at different ages display different effects on the amount of saving of workers. However, both adult and old aspirations dampen the positive effect on wealth accumulation brought about by warm-glow altruism. Therefore, under aspirations, both bequest motivated and non-bequest motivated individuals will behave more similarly than when they do not exhibit aspirational concerns. We also show that the introduction of aspirations raises the speed of convergence to the dynastic steady state when there exist a bequest motive. However, when this motive is absent, aspirations lower the speed of convergence.