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Compensatory inter vivos gifts

  • Hochguertel , Stefan

    (European University Institute)

  • Ohlsson, Henry

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Empirical studies of intergenerational transfers usually find that bequests are equally divided among heirs while inter vivos gifts tend to be compensatory. Using the 1992 and 1994 waves of the Health and Retirement Study, we find that only 4% of parents who give, divide their gifts equally among their children. Estimating probit models, using family panels, we find that gifts are compensatory in the sense that a child is more likely to receive a gift if she works fewer hours and has lower income than than her brothers and sisters. These results carry over to the amounts given. Fixed effects Tobit estimations show that the fewer hours a child works and the lower her income is, the more the parents give. Gifts are compensatory. The empirical results are, therefore, consistent with the predictions of the altruistic model of intergenerational transfers.

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Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 31.

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Length: 39 pages
Date of creation: 31 Oct 2000
Date of revision:
Publication status: Published in Journal of Applied Econometrics, 2009, pages 993-1023.
Handle: RePEc:hhs:gunwpe:0031
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/

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