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On the Demand for Grandchildren: Tied Transfers and the Demonstration Effect

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  • Cox, Donald

    (Department of Economics, Boston College)

  • Stark, Oded

    (University of Bonn)

Abstract

Most private giving between living generations takes the form of "tied" transfers, such as help with housing downpayments. We argue that parents provide help with downpayments in order to encourage the production of grandchildren, and that such a subsidization emanates from the "demonstration effect:" a child's propensity to furnish parents with attention and care can be conditioned by parental example. Parents who desire such transfers in the future have an incentive to make transfers to their own parents in order to instill appropriate preferences in their children. This generates a derived demand for grandchildren since potential grandparents will be treated better by their adult children if the latter have their own children to whom to demonstrate the appropriate behavior. Empirical work, based on waves 1 and 2 of the National Survey of Families and Households, indicates behavior consistent with subsidization of the production of grandchildren and the demonstration effect.

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Bibliographic Info

Paper provided by Institute for Advanced Studies in its series Economics Series with number 158.

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Length: 39 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:ihs:ihsesp:158

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Keywords: Intergenerational transfers; The demonstration effect; Inculcating values in children; Subsidizing the production of grandchildren; Housing downpayments;

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Cited by:
  1. Marta Melguizo Garde, 2007. "La motivación de las transmisiones lucrativas entre generaciones de una familia: modelos teóricos y evidencia empírica," Hacienda Pública Española, IEF, vol. 181(2), pages 81-118, June.
  2. Francois-Charles Wolff & Seymour Spilerman & Claudine Attias-Donfut, 2005. "Do Parents Help More their Less Well-Off Children? Evidence from a Sample of Migrants to France," Microeconomics 0504001, EconWPA.
  3. Jenjira Yahirun & Dana Hamplová, 2014. "Children’s union status and contact with mothers: A cross-national study," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 30(51), pages 1413-1444, May.
  4. Donald Cox, 2007. "Biological Basics and the Economics of the Family," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 91-108, Spring.
  5. Ralitza Dimova & François-Charles Wolff, 2011. "Do downward private transfers enhance maternal labor supply? Evidence from around Europe," Journal of Population Economics, Springer, vol. 24(3), pages 911-933, July.
  6. Maurice J. Roche & David Duffy, 2007. "Getting a Helping Hand: Parental Transfers and First-Time Homebuyers," Economics, Finance and Accounting Department Working Paper Series n1740507, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  7. Liliana Pezzin & Robert Pollak & Barbara Schone, 2009. "Long-term care of the disabled elderly: do children increase caregiving by spouses?," Review of Economics of the Household, Springer, vol. 7(3), pages 323-339, September.
  8. Audrey Light & Kathleen McGarry, 2003. "Why Parents Play Favorites: Explanations for Unequal Bequests," NBER Working Papers 9745, National Bureau of Economic Research, Inc.
  9. José Giménez-Nadal & Miriam Marcén & Raquel Ortega, 2012. "Substitution and Presence Effects of Children on Mothers’ Adult Care Time," Journal of Family and Economic Issues, Springer, vol. 33(1), pages 2-10, March.
  10. Solveig Cunningham & Kathryn Yount & Michal Engelman & Emily Agree, 2013. "Returns on Lifetime Investments in Children in Egypt," Demography, Springer, vol. 50(2), pages 699-724, April.
  11. Thomas Leopold & Thorsten Schneider, 2010. "Family Events and Timing of Intergenerational Transfers," SOEPpapers on Multidisciplinary Panel Data Research 327, DIW Berlin, The German Socio-Economic Panel (SOEP).
  12. Robert Mare, 2011. "A Multigenerational View of Inequality," Demography, Springer, vol. 48(1), pages 1-23, February.
  13. De Fraja, Gianni, 2009. "The origin of utility: Sexual selection and conspicuous consumption," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 51-69, October.
  14. Donald Cox & Beth J. Soldo, 2004. "Motivation for Money and Care that Adult Children Provide for Parents: Evidence from "Point-Blank" Survey Questions," Working Papers, Center for Retirement Research at Boston College 2004-17, Center for Retirement Research.
  15. Javier Olivera, 2013. "Old-age Support and Demographic Transition in Developing Countries. A Cultural Transmission Model," Working Papers 201307, Geary Institute, University College Dublin.
  16. Norifumi Yukutake & Shinichiro Iwata & Takako Idee, 2011. "Strategic Interaction between Inter Vivos Gifts and Housing Acquisition," Global COE Hi-Stat Discussion Paper Series gd11-201, Institute of Economic Research, Hitotsubashi University.
  17. Mitrut, Andreea & Wolff, François-Charles, 2009. "A causal test of the demonstration effect theory," Economics Letters, Elsevier, vol. 103(1), pages 52-54, April.
  18. Kuhn, Michael & Nuscheler, Robert, 2011. "Optimal public provision of nursing homes and the role of information," Journal of Health Economics, Elsevier, vol. 30(4), pages 795-810, July.

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