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A Theory of Educational Inequality Family and Agency Costs

  • Jellal, Mohamed

In this paper, we examine the consequences of imperfect information on the pattern of transfers from parents to children. Drawing on the theory of mechanism design, we consider a model of family contract with two levels of effort. We prove that equal transfers among children are expected under perfect information, while the second-best contract implies risksharing between the two generations, so that poor families experience higher agency costs..

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17434.

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Date of creation: 21 Sep 2009
Date of revision:
Handle: RePEc:pra:mprapa:17434
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  1. Cremer, Helmuth & Pestieau, Pierre, 1996. "Bequests as a Heir "Discipline Device."," Journal of Population Economics, Springer, vol. 9(4), pages 405-14, November.
  2. Ernesto Villanueva, 2003. "Parental altruism under imperfect information: theory and evidence," Working Papers 19, Barcelona Graduate School of Economics.
  3. Bisin, A. & Verdier, T., 1997. "The Economics of Cultural Transmission and the Dynamics of Preferences," DELTA Working Papers 97-03, DELTA (Ecole normale supérieure).
  4. Lundholm, Michael & Ohlsson, Henry, 1999. "Post Mortem Reputation, Compensatory Gifts and Equal Bequests," Research Papers in Economics 1999:1, Stockholm University, Department of Economics.
  5. Ermisch, John & Di Salvo, Pamela, 1997. "The Economic Determinants of Young People's Household Formation," Economica, London School of Economics and Political Science, vol. 64(256), pages 627-44, November.
  6. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June.
  7. Bruce A. Weinberg, 2001. "An Incentive Model of the Effect of Parental Income on Children," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 266-280, April.
  8. 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.
  9. Lam, D. & Schoeni, R.F., 1993. "Private Interhousehold Transfers of Money and Time: New Empirical Evidence," Papers 93-26, RAND - Labor and Population Program.
  10. Gatti, Roberta, 2000. "Family altruism and incentives," Policy Research Working Paper Series 2505, The World Bank.
  11. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
  12. Assar Lindbeck & Sten Nyberg, 2001. "Raising Children to Work Hard: Altruism, Work Norms and Social Insurance," CESifo Working Paper Series 498, CESifo Group Munich.
  13. Furnham, Adrian, 1999. "The saving and spending habits of young people," Journal of Economic Psychology, Elsevier, vol. 20(6), pages 677-697, December.
  14. Wolff François-Charles & Barnet-Verzat Christine, 2003. "Labor opportunities against family intergenerational exchange," Economics Bulletin, AccessEcon, vol. 10(1), pages 1-7.
  15. repec:oup:restud:v:47:y:1980:i:1:p:225-38 is not listed on IDEAS
  16. Wolff, Francois-Charles, 2006. "Microeconomic models of family transfers," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  17. Jellal, Mohamed & Wolff, François Charles, 2003. "Leaving home as a self-selection device," MPRA Paper 38528, University Library of Munich, Germany.
  18. repec:oup:qjecon:v:105:y:1990:i:1:p:187-217 is not listed on IDEAS
  19. Barnet-Verzat, Christine & Wolff, Francois-Charles, 2002. "Motives for pocket money allowance and family incentives," Journal of Economic Psychology, Elsevier, vol. 23(3), pages 339-366, June.
  20. repec:ebl:ecbull:v:10:y:2003:i:1:p:1-7 is not listed on IDEAS
  21. Fernandes, A., 2000. "Altruism with Endogenous Labor Supply," Papers 0002, Centro de Estudios Monetarios Y Financieros-.
  22. Furnham, Adrian, 2001. "Parental attitudes to pocket money/allowances for children," Journal of Economic Psychology, Elsevier, vol. 22(3), pages 397-422, June.
  23. Arrondel, Luc & Masson, Andre, 2006. "Altruism, exchange or indirect reciprocity: what do the data on family transfers show?," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  24. repec:tpr:qjecon:v:121:y:2006:i:4:p:1473-1503 is not listed on IDEAS
  25. Chami, Ralph, 1996. "King Lear's dilemma: Precommitment versus the last word," Economics Letters, Elsevier, vol. 52(2), pages 171-176, August.
  26. McGarry, Kathleen, 1999. "Inter vivos transfers and intended bequests," Journal of Public Economics, Elsevier, vol. 73(3), pages 321-351, September.
  27. 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 874-92, September.
  28. Eli Feinerman & Edward J. Seiler, 2002. "Private transfers with incomplete information: A contribution to the "altruism-exchange motivation for transfers" debate," Journal of Population Economics, Springer, vol. 15(4), pages 715-736.
  29. Chami, Ralph, 1998. "Private Income Transfers and Market Incentives," Economica, London School of Economics and Political Science, vol. 65(260), pages 557-80, November.
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