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Counter-Compensatory Inter-Vivos Transfers and Parental Altruism: Compatibility or Orthogonality?

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Author Info
Stark, Oded (Department of Economics, University of Oslo)
Zhang, Junsen (Department of Economics, The Chinese University of Hong Kong)

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Abstract

The intersection of the standard altruism hypothesis with the quite strong evidence that bequests tend to be equal suggests that inter-vivos transfers should be strongly compensatory. Yet the available evidence is not in congruence with this implication. It has therefore been inferred that the motive underlying inter-vivos transfers is not parental altruism. In this paper we present an argument showing why parents who are equally altruistic toward their children optimally transfer more to the child whose earnings are higher. We show that rather than being orthogonal to parental altruism, counter-compensating transfers emanate from such altruism. A key point in the analysis is that parents and children are interlinked in a rich web of (vertical and possibly horizontal) transfers, reverse transfers, direct transfers, and indirect transfers.

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File URL: http://www.ihs.ac.at/publications/eco/es-82.pdf
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Publisher Info
Paper provided by Institute for Advanced Studies in its series Economics Series with number 82.

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Length: 11 pages
Date of creation: Jul 2000
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Handle: RePEc:ihs:ihsesp:82

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Related research
Keywords: Parental altruism; Inter-vivos transfers;

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Find related papers by JEL classification:
D10 - Microeconomics - - Household Behavior - - - General
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
D64 - Microeconomics - - Welfare Economics - - - Altruism

References listed on IDEAS
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  1. Cox, Donald & Rank, Mark R, 1992. "Inter-vivos Transfers and Intergenerational Exchange," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 305-14, May. [Downloadable!] (restricted)
  2. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1993. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December. [Downloadable!] (restricted)
  4. Dunn, Thomas A. & Phillips, John W., 1997. "The timing and division of parental transfers to children," Economics Letters, Elsevier, vol. 54(2), pages 135-137, February. [Downloadable!] (restricted)
  5. Stark, Oded, 1998. "Equal bequests and parental altruism: compatibility or orthogonality?," Economics Letters, Elsevier, vol. 60(2), pages 167-171, August. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yang-Ming Chang, 2007. "Transfers and bequests: a portfolio analysis in a Nash game," Annals of Finance, Springer, vol. 3(2), pages 277-295, March. [Downloadable!] (restricted)
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