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Intergenerational Transfers and Liquidity Constraints


  • Donald Cox

    (Boston College)


A growing body of evidence indicates that liquidity constraints could affect a substantial proportion of U. S. consumers, but little is known about why these constraints might exist. An important, but little-explored, issue is the relationship between inter vivos intergenerational transfers and liquidity constraints. These transfers can ease borrowing constraints. Empirical transfer patterns match those predicted from a model in which transfers are allocated to liquidity-constrained consumers. In particular, the distinction between current and permanent incomes of potential recipients is a key aspect of private-transfer behavior. The findings have important implications for our understanding of consumer behavior.
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Suggested Citation

  • Donald Cox, 1987. "Intergenerational Transfers and Liquidity Constraints," Boston College Working Papers in Economics 157, Boston College Department of Economics.
  • Handle: RePEc:boc:bocoec:157

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