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A semiparametric alternative to the Heckman correction: application with left-censored data on parental transfers

Author

Listed:
  • Lu Wang

    (Quora, Inc.)

  • Yixiao Jiang

    (Western New England University)

  • Zhaochen He

    (Christopher Newport University)

Abstract

Using a semiparametric estimator developed by Klein and Vella (J Appl Econom 24(5):735–762, 2009b), we study the motives for parental wealth transfers to living children using left-censored data from the Health and Retirement Study. We confirm the presence of heteroskedastic errors in our data and show that the inverse Mills ratio approach employed by the Heckman correction would be biased in such a setting. Using the more flexible semiparametic approach, we find evidence of a nonlinear relationship between amount of inter vivo transfers and recipient children’s household incomes, suggesting that parents’ motives for transferring wealth may vary depending on their child’s income level.

Suggested Citation

  • Lu Wang & Yixiao Jiang & Zhaochen He, 2024. "A semiparametric alternative to the Heckman correction: application with left-censored data on parental transfers," Empirical Economics, Springer, vol. 66(4), pages 1847-1866, April.
    • Handle: RePEc:spr:empeco:v:66:y:2024:i:4:d:10.1007_s00181-023-02507-6
    DOI: 10.1007/s00181-023-02507-6
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    More about this item

    Keywords

    Inter vivos transfers; Heteroskedasticity; Earning income tax credit (EITC);
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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