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Family Transfers Involving Three Generations

  • Arrondel, L.
  • Masson, A.

Most models of family intergenerational transfers consider only two générations (parents and children) and focus on two motives for parental transfers : altruism and exchange, while assuming almost perfect susbtitution between inter vivos transfers and bequests. Based upon French evidence, this paper shows, on the contrary, that inter vivos downward transfers, made at quite distant date over the life cycle, belong to three distinct categories, according to the main objective pursued by parents : investment in child's education ; financial assistance ; wealth transmission (being susbtitutes for bequests only in the third case). Moreover, the domain of the analysis of familial behavior is expanded from two to three generations. French data do indeed show that, for each type of downward transfer, parents are strongly influenced by the behavior of their own parents ; moreover, for upward transfers, there is some, less robust, evidence of typical behaviors similar to Cox and Stark demonstration effect : parents help their own (old) parents, expecting to receive comparable support in old days from their children. Such behaviors can however be given different interpretations (that all blur the distinction between altruistic and exchange motives) : imitation ; transmission of family values or norms ; preference shaping of formation ; "indirect reciprocities", where the beneficiary of a transfer does not give back to the initial giver but to a third person of another generation.

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Paper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 1999-16.

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Length: 25 pages
Date of creation: 1999
Date of revision:
Publication status: Published in Scandinavian Journal of Economics, 2001, 103, pp. 415-443
Handle: RePEc:del:abcdef:1999-16
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  1. Donald Cox & Oded Stark, 1996. "Intergenerational Transfers and the Demonstration Effect," Boston College Working Papers in Economics 329., Boston College Department of Economics.
  2. Arrondel, L. & Laferrere, A., 1998. "Taxation and Wealth Transmission in France," DELTA Working Papers 98-13, DELTA (Ecole normale supérieure).
  3. Stefan Hochguertel & Henry Ohlsson, 2000. "Compensatory inter vivos gifts," Economics Working Paper Archive wp_319, Levy Economics Institute.
  4. Arrondel, L. & Masson, A. & Pestieau, P., . "Bequests and inheritance: empirical issues and France-U.S. comparison," CORE Discussion Papers RP -1274, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Kessler, Denis & Masson, Andre, 1989. "Bequest and Wealth Accumulation: Are Some Pieces of the Puzzle Missing?," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 141-52, Summer.
  6. Maria G. Perozek, 1998. "A Reexamination of the Strategic Bequest Motive," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 423-445, April.
  7. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June.
  8. Gary S. Becker & Kevin M. Murphy, . "The Family and the State," University of Chicago - Population Research Center 87-15, Chicago - Population Research Center.
  9. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1995. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Boston University - Institute for Economic Development 65, Boston University, Institute for Economic Development.
  10. Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, 1996. "The Effects of Income and Wealth on Time and Money Transfers between Parents and Children," NBER Working Papers 5522, National Bureau of Economic Research, Inc.
  11. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  12. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," UCLA Economics Working Papers 151, UCLA Department of Economics.
  13. 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.
  14. François-Charles Wolff & Luc Arrondel, 1998. "La nature des transferts inter vivos en France : investissements humains, aides financières et transmission du patrimoine," Économie et Prévision, Programme National Persée, vol. 135(4), pages 1-27.
  15. André Masson, 1999. "Quelle solidarité intergénérationnelle ?," Revue Française d'Économie, Programme National Persée, vol. 14(1), pages 27-90.
  16. Masson, A. & Pestieau, P., 1996. "Bequests motives and models of inheritance: a survey of the literature," DELTA Working Papers 96-20, DELTA (Ecole normale supérieure).
  17. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  18. 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.
  19. McGarry, Kathleen, 1999. "Inter vivos transfers and intended bequests," Journal of Public Economics, Elsevier, vol. 73(3), pages 321-351, September.
  20. Arrondel, Luc & Masson, Andre, 2001. " Family Transfers Involving Three Generations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(3), pages 415-43, September.
  21. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
  22. Kotlikoff, Laurence J, 1988. "Intergenerational Transfers and Savings," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 41-58, Spring.
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