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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Paper provided by Institute for Advanced Studies in its series Economics Series with number
158.
Find related papers by JEL classification: A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics D10 - Microeconomics - - Household Behavior - - - General I30 - Health, Education, and Welfare - - Welfare and Poverty - - - General J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
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Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1985.
"The Strategic Bequest Motive,"
Journal of Political Economy,
University of Chicago Press, vol. 93(6), pages 1045-76, December.
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Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986.
"The Strategic Bequest Motive,"
Journal of Labor Economics,
University of Chicago Press, vol. 4(3), pages S151-82, July.
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Henderson, J Vernon & Ionnides, Yannis M, 1986.
"Tenure Choice and the Demand for Housing,"
Economica,
London School of Economics and Political Science, vol. 53(210), pages 231-46, May.
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