IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Testing Parental Altruism: Implications of a Dynamic Model

  • Kathleen McGarry
Registered author(s):

    Each year parents transfer a great deal of money to their adult children. While intuition might suggest that these transfers are altruistic and made out of concern for the well-being of the children, the fundamental prediction of the altruistic model has been decisively rejected in empirical tests. Specifically, the required derivative restriction-that an increase of one dollar in the income of the recipient, accompanied by a decrease of one dollar in the income of the donor, leads to a one dollar reduction in transfers-fails to hold. I show in this paper that in fact, this prediction will not hold if parents use observations on the current incomes of children to update their expectations about future incomes. This result implies that many past studies have relied on too restrictive a test, and furthermore, that our ability to distinguish empirically between altruistic and exchange behavior is severely limited. The paper also analyzes the variation in transfer behavior over time and finds substantial change across periods in recipiency status as well as strong correlation between inter vivos transfers and the transitory income of the recipient. This evidence suggest that dynamic models can provide insights into transfer behavior that are impossible to obtain in a static context.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.nber.org/papers/w7593.pdf
    Download Restriction: no

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7593.

    as
    in new window

    Length:
    Date of creation: Mar 2000
    Date of revision:
    Handle: RePEc:nbr:nberwo:7593
    Note: AG
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
    Email:


    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7593. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.