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Parents/children “deals”: Inter-Vivos Transfers and Living Proximity

Author

Listed:
  • Flavia Coda Moscarola

    (CeRP - Collegio Carlo Alberto, Turin)

  • Elsa Fornero

    (University of Turin and CeRP - Collegio Carlo Alberto, Turin)

  • Mariacristina Rossi

    (University of Turin and CeRP - Collegio Carlo Alberto, Turin)

Abstract

We use a Cox-type model to investigate the role of the family as an informal market: parents enjoy their children’s proximity (a proxy for the informal care they can receive from their kids) and “reward” them with an anticipated wealth transfer. Children appreciate the reward, particularly when they are likely to be subject to liquidity constraints. For unconstrained households, our model predicts that the amount of time devoted to parents – and, correspondingly, the amount of transfers received from them - is related negatively to their own lifetime income and positively to their parents’ wealth. Other things being equal, liquidity constraints increase the utility associated to money in youth and correspondingly increase the living proximity of children to their parents’ home. We test the model’s predictions on Italian data, taken from the Bank of Italy Survey on Household Income and Wealth, by distinguishing between liquidity constrained households and unconstrained ones. Our preliminary results are in line with the theoretical predictions of the model. Proximity to parents is indeed rewarded with higher transfers. As for financial imperfections, liquidity constrained households live closer to their parents than non-liquidity constrained households.

Suggested Citation

  • Flavia Coda Moscarola & Elsa Fornero & Mariacristina Rossi, 2010. "Parents/children “deals”: Inter-Vivos Transfers and Living Proximity," CeRP Working Papers 95, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    • Handle: RePEc:crp:wpaper:95
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    References listed on IDEAS

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    5. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1121-1166, December.
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    7. repec:fth:pennfi:69 is not listed on IDEAS
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    Cited by:

    1. Emanuele Ciani & Claudio Deiana, 2016. "No Free Lunch, Buddy: Housing Transfers and Informal Care Later in Life," Center for the Analysis of Public Policies (CAPP) 0134, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    2. Laura Cavalli & Alessandro Bucciol & Paolo Pertile & Veronica Polin & Nicola Sartor & Alessandro Sommacal, 2012. "Modelling life-course decisions for the analysis of interpersonal and intrapersonal redistribution," Working Papers 25/2012, University of Verona, Department of Economics.
    3. Emanuele Ciani & Claudio Deiana, 2018. "No free lunch, buddy: past housing transfers and informal care later in life," Review of Economics of the Household, Springer, vol. 16(4), pages 971-1001, December.

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