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Motives for parental money transfers in Europe

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  • Javier Olivera

Abstract

We find a high prevalence of Europeans giving equal financial transfers to their adult children, regardless of siblings’ income differences. This behaviour is sharply different from previously documented for American counterparts and it is not predicted by any conventional model on family transfers. We build a model to explain the motives for European parental transfers which includes concern with fairness and leaves altruism as an additional motive. We show that, in contrast to the prediction of the pure altruism model, parents do not offset income inequality among their children but decide to give equal transfers in order to be “fair”. However, the parents might start to give larger transfers to poorer children if the siblings’ income inequality becomes unbearable from the parent’s view. We find evidence for this behaviour using simulations for parameter’s distributions and also microeconomic data of 9 European countries from the Survey of Health, Aging, and Retirement in Europe (SHARE).

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Bibliographic Info

Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0826.

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Date of creation: Sep 2008
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Handle: RePEc:ete:ceswps:ces0826

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Keywords: intergenerational transfers; exchange; altruism; fairness.;

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