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Private Income Transfers and Market Incentives

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  • Chami, Ralph

Abstract

The paper introduces labor supply considerations, and labor earnings uncertainty into a parent-child framework in the presence of 'merit goods.' The author investigates the implications of various parental bequest rules on the effort decisions of the offspring, where the parent cannot perfectly observe her child's market activities. The asymmetry in information and preferences gives rise to a moral hazard problem, and as a result the parent may not fully insure her child because the source of risk is not entirely exogenous. In this case, optimal parental transfers are shown to be state-contingent. Moreover, the child's effort is higher in the case with a merit good and parental transfers than in the case without a merit good. Copyright 1998 by The London School of Economics and Political Science

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 65 (1998)
Issue (Month): 260 (November)
Pages: 557-80

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Handle: RePEc:bla:econom:v:65:y:1998:i:260:p:557-80

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Cited by:
  1. Casey Mulligan & Tomas Philipson, . "Merit Motives and Government Intervention: Public Finance in Reverse," University of Chicago - Population Research Center 2000-03, Chicago - Population Research Center.
  2. Jellal, Mohamed, 2009. "A Theory of Educational Inequality Family and Agency Costs," MPRA Paper 17434, University Library of Munich, Germany.
  3. Ingela Alger & Jörgen Weibull, 2009. "Kinship, Incentives and Evolution," Working Papers hal-00435431, HAL.
  4. Ingela Alger & Jörgen W. Weibull, 2006. "Altruism and Climate," Boston College Working Papers in Economics 643, Boston College Department of Economics.
  5. Fousseynou Bah, 2011. "A Simultaneous Determination of the Inter Vivos Transfer and the Unemployment Duration: the Malian case," Working Papers halshs-00630262, HAL.
  6. Yang-Ming Chang, 2007. "Transfers and bequests: a portfolio analysis in a Nash game," Annals of Finance, Springer, vol. 3(2), pages 277-295, March.
  7. John Ermisch, 2003. "How Do Parents Affect the Life Chances of Their Children as Adults? An Idiosyncratic Review," Social and Economic Dimensions of an Aging Population Research Papers 101, McMaster University.
  8. François-Charles Wolff & Claudine Attias-Donfut, 2007. "Intergenerational Transfer Behaviour in Europe," Economie et Statistique, Institut National de la Statistique et des Etudes Economiques, vol. 403, pages 117-141, December.
  9. Alger, Ingela & Weibull, Jörgen, 2007. "The Fetters of the Sib: Weber Meets Darwin," Working Paper Series in Economics and Finance 682, Stockholm School of Economics.
  10. Yang-Ming Chang & Dennis L. Weisman, 2005. "Sibling Rivalry and Strategic Parental Transfers," Southern Economic Journal, Southern Economic Association, vol. 71(4), pages 821-836, April.
  11. Chami, Ralph & Fischer, Jeffrey H., 2000. "Do private income transfers increase labor market risk?," Economics Letters, Elsevier, vol. 69(2), pages 143-151, November.
  12. Andaluz, Joaquín & Marcén, Miriam & Molina, José Alberto, 2007. "Income Transfers, Welfare and Family Decisions," IZA Discussion Papers 2804, Institute for the Study of Labor (IZA).
  13. François-Charles Wolff & Christine Barnet-Verzat, 2008. "Pocket money and child effort at school," Economics Bulletin, AccessEcon, vol. 9(13), pages 1-10.
  14. Ana Fernandes, 2011. "Altruism, labor supply and redistributive neutrality," Journal of Population Economics, Springer, vol. 24(4), pages 1443-1469, October.
  15. Yang-Ming Chang, 2012. "Strategic transfers, redistributive fiscal policies, and family bonds: a micro-economic analysis," Journal of Population Economics, Springer, vol. 25(4), pages 1481-1502, October.
  16. Jellal, Mohamed, 2009. "Family Capitalism Corporate Governance Theory," MPRA Paper 17886, University Library of Munich, Germany.
  17. repec:ebl:ecbull:v:9:y:2008:i:13:p:1-10 is not listed on IDEAS

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