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The Marginal Propensity to Spend on Adult Children

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Author Info
Joseph Altonji (Yale University)
Ernesto Villanueva (Bank of Spain)

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Abstract

We use mortality rates and age specific estimates of the response of transfers and wealth to lifetime resources to estimate how much of an extra dollar of parental lifetime resources will ultimately be passed on to adult children in the form of inter vivos transfers and bequests. We find that parents pass on between 2 and 3 cents of an extra dollar of expected lifetime resources in bequests and about 3 cents in transfers, which together amount to about one fifth of our rough estimate of the marginal propensity to spend on children under 18 and on college. The value of .4 relating earnings of the child to earnings of the parent rises to about .46 when the effect of parental earnings on bequests and transfers is added on, although the estimate is lower for nonwhites and varies with assumptions about the intergenerational earnings correlation and the number of children.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Advances in Economic Analysis & Policy.

Volume (Year): 7 (2007)
Issue (Month): 1 ()
Pages: 1488-1488
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Related research
Keywords: intervivos transfers bequests income and wealth

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Find related papers by JEL classification:
D10 - Microeconomics - - Household Behavior - - - General

References listed on IDEAS
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Joseph Altonji & Ernesto Villanueva, 2007. "The Marginal Propensity to Spend on Adult Children," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 7(1), pages 1488-1488. [Downloadable!] (restricted)
    Other versions:
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