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Private Income Transfers and Market Incentives

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  • Chami, Ralph

Abstract

The paper introduces labor supply considerations, and labor earnings uncertainty into a parent-child framework in the presence of 'merit goods.' The author investigates the implications of various parental bequest rules on the effort decisions of the offspring, where the parent cannot perfectly observe her child's market activities. The asymmetry in information and preferences gives rise to a moral hazard problem, and as a result the parent may not fully insure her child because the source of risk is not entirely exogenous. In this case, optimal parental transfers are shown to be state-contingent. Moreover, the child's effort is higher in the case with a merit good and parental transfers than in the case without a merit good. Copyright 1998 by The London School of Economics and Political Science

Suggested Citation

  • Chami, Ralph, 1998. "Private Income Transfers and Market Incentives," Economica, London School of Economics and Political Science, vol. 65(260), pages 557-580, November.
  • Handle: RePEc:bla:econom:v:65:y:1998:i:260:p:557-80
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    Citations

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    Cited by:

    1. Mohamed Jellal & FranÁois-Charles Wolff, 2003. "Leaving Home as a Self-selection Device," Economica, London School of Economics and Political Science, vol. 70(279), pages 423-438, August.
    2. Casey Mulligan & Tomas Philipson, "undated". "Merit Motives and Government Intervention: Public Finance in Reverse," University of Chicago - Population Research Center 2000-03, Chicago - Population Research Center.
    3. Ana Fernandes, 2011. "Altruism, labor supply and redistributive neutrality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1443-1469, October.
    4. François-Charles Wolff & Claudine Attias-Donfut, 2007. "Les comportements de transferts intergénérationnels en Europe," Économie et Statistique, Programme National Persée, vol. 403(1), pages 117-141.
    5. 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.
    6. Erlend Eide Bø & Elin Halvorsen & Thor Olav Thoresen, 2015. "Heterogeneity of the Carnegie Effect," CESifo Working Paper Series 5339, CESifo Group Munich.
    7. Ingela Alger & Jörgen W. Weibull, 2010. "Kinship, Incentives, and Evolution," American Economic Review, American Economic Association, vol. 100(4), pages 1725-1758, September.
    8. Wolff, Francois-Charles & Laferrere, Anne, 2006. "Microeconomic models of family transfers," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
    9. Le, Thanh, 2011. "Remittances for economic development: The investment perspective," Economic Modelling, Elsevier, vol. 28(6), pages 2409-2415.
    10. repec:ebl:ecbull:v:9:y:2008:i:13:p:1-10 is not listed on IDEAS
    11. Jellal, Mohamed, 2014. "A theory of family education incentives and inequality," MPRA Paper 57913, University Library of Munich, Germany.
    12. Chami, Ralph & Fischer, Jeffrey H., 2000. "Do private income transfers increase labor market risk?," Economics Letters, Elsevier, vol. 69(2), pages 143-151, November.
    13. John Ermisch, 2003. "How Do Parents Affect the Life Chances of Their Children as Adults? An Idiosyncratic Review," Social and Economic Dimensions of an Aging Population Research Papers 101, McMaster University.
    14. François-Charles Wolff & Christine Barnet-Verzat, 2008. "Pocket money and child effort at school," Economics Bulletin, AccessEcon, vol. 9(13), pages 1-10.
    15. Fousseynou Bah, 2011. "A Simultaneous Determination of the Inter Vivos Transfer and the Unemployment Duration: the Malian case," Working Papers halshs-00630262, HAL.
    16. Andaluz, Joaquín & Marcén, Miriam & Molina, José Alberto, 2007. "Income Transfers, Welfare and Family Decisions," IZA Discussion Papers 2804, Institute for the Study of Labor (IZA).
    17. Alger, Ingela & Weibull, Jörgen, 2007. "The Fetters of the Sib: Weber Meets Darwin," SSE/EFI Working Paper Series in Economics and Finance 682, Stockholm School of Economics.
    18. Yang-Ming Chang, 2012. "Strategic transfers, redistributive fiscal policies, and family bonds: a micro-economic analysis," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(4), pages 1481-1502, October.
    19. Yang-Ming Chang & Dennis L. Weisman, 2005. "Sibling Rivalry and Strategic Parental Transfers," Southern Economic Journal, Southern Economic Association, vol. 71(4), pages 821-836, April.
    20. Jellal, Mohamed, 2009. "A Theory of Educational Inequality Family and Agency Costs," MPRA Paper 17434, University Library of Munich, Germany.
    21. Weibull, Jörgen & Alger, Ingela, 2006. "Altruism and Climate," SSE/EFI Working Paper Series in Economics and Finance 633, Stockholm School of Economics, revised 31 Aug 2006.
    22. Jellal, Mohamed, 2009. "Family Capitalism Corporate Governance Theory," MPRA Paper 17886, University Library of Munich, Germany.

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