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

Listed author(s):
  • Stark, Oded

    (Department of Economics, University of Oslo)

  • Zhang, Junsen

    (Department of Economics, The Chinese University of Hong Kong)

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
File Function: First version, 2000
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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
Handle: RePEc:ihs:ihsesp:82
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  1. Paul L. Menchik, 1980. "Primogeniture, Equal Sharing, and the U.S. Distribution of Wealth," The Quarterly Journal of Economics, Oxford University Press, vol. 94(2), pages 299-316.
  2. Cox, Donald & Rank, Mark R, 1992. "Inter-vivos Transfers and Intergenerational Exchange," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 305-314, May.
  3. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-1198, December.
  4. Stark, Oded, 1998. "Equal bequests and parental altruism: compatibility or orthogonality?," Economics Letters, Elsevier, vol. 60(2), pages 167-171, August.
  5. Wilhelm, Mark O, 1996. "Bequest Behavior and the Effect of Heirs' Earnings: Testing the Altruistic Model of Bequests," American Economic Review, American Economic Association, vol. 86(4), pages 874-892, September.
  6. 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.
  7. 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 1153-1189, December.
  8. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-546, June.
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