On January 15, 2000, The New York Times reported
that
in the first week of the new millennium local hospitals
had recorded an astonishing 50.8% more deaths than in the
last week of 1999.1 The Times
suggested
that this phenom-
enon was due to infirm people willing
themselves to stay
alive
long enough
to witness the dawning of the new age.
Apparently,
the anticipation of momentous events can mo-
tivate people
to live
longer.
This evidence raises the
intriguing question of whether
the
timing of death responds
to economic factors. Could the
timing of death be, to some extent, a rational decision?
Economists presume
that the
timing of other
important
events, such as childbearing or marriage, may be so affected-
why not dying as well?
In this paper we examine data from U.S. federal estate-
tax returns to shed
light on this question. We
investigate
the
temporal pattern of deaths around the time of changes
in the
estate-tax
system-periods when
living longer (or dying
sooner) could significantly affect estate-tax
liability. These
periods provide
ideal natural experiments enabling us to test
for the presence and
strength of this particular kind of
behavioral response
to taxes.
There is a vast literature, briefly
summarized in Auerbach
and Slemrod (1997), concerning
the
impact of taxation on
economic decisions ranging
from labor
supply
to business
organization
to exercise of stock options. Slemrod (1990)
characterized the magnitude of behavioral response as fit-
ting a hierarchy, at the
top of which, with the
largest degree of responsiveness,
lies the
timing of transactions with re-
spect
to anticipated changes
in the tax structure.2 The classic
example, detailed in Burman, Clausing, and O'Hare (1994),
is the increase in capital-gains realizations in 1986 in
anticipation of increased taxation beginning
the next year.
Realizations increased from $167 billion in 1985 to $322
billion in 1986, only
to fall back to $137 billion in 1987.
Long-term capital-gains realizations of corporate stock in
December of 1986 were nearly
seven times their level in the
same month of 1985. Other examples of
large timing re-
sponses
include exercise of stock options (Goolsbee, 2000),
charitable contributions (Burman and Randolph, 1994), and
firms'
shifting of taxable income
through deferred income
recognition and accelerated expense recognition (Scholes,
Wilson, and Wolfson, 1992)
