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Tough Love For Lazy Kids

Author

Listed:
  • Kevin Wiseman

    (University of Minnesota)

  • Ctirad Slavık

    (University of Minnesota)

Abstract

Simple theories about why parents give money to their children fail to explain a central puzzle in inter-generational transfers: While parents are alive, they give more money to their poorer children. Bequests, by contrast, are typically divided evenly between children. We construct a model in which altruistic parents behave this way when facing a dynamic insurance problem. Parents concentrate incentives later in life, so that poorer children are partially insured against income shocks early in life, while insurance and incentive motives offset each other in determining bequests. We show that equal division of bequests can arise in the presence of small costs of unequal division.

Suggested Citation

  • Kevin Wiseman & Ctirad Slavık, 2009. "Tough Love For Lazy Kids," 2009 Meeting Papers 1091, Society for Economic Dynamics.
  • Handle: RePEc:red:sed009:1091
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    File URL: https://economicdynamics.org/meetpapers/2009/paper_1091.pdf
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    References listed on IDEAS

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    1. Ohlsson, Henry, 2007. "The equal division puzzle – empirical evidence on intergenerational transfers in Sweden," Working Paper Series 2007:10, Uppsala University, Department of Economics.
    2. 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..
    3. 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.
    4. Stefan Hochguertel & Henry Ohlsson, 2009. "Compensatory inter vivos gifts," Journal of Applied Econometrics, John Wiley & Sons, Ltd., pages 993-1023.
    5. Rene van den Brink & Rene Levinsky & Miroslav Zeleny, 2007. "The balanced solution for cooperative transferable utility games," Jena Economic Research Papers 2007-073, Friedrich-Schiller-University Jena.
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    Cited by:

    1. Charles Horioka, 2014. "Are Americans and Indians more altruistic than the Japanese and Chinese? Evidence from a new international survey of bequest plans," Review of Economics of the Household, Springer, vol. 12(3), pages 411-437, September.
    2. Ramon L. Clarete & Ernesto M. Pernia & Ammielou Gaduena & Adrian Mendoza, 2014. "The Role of Science, Technology and Research in Economic Development," UP School of Economics Discussion Papers 201407, University of the Philippines School of Economics.
    3. Charles Yuji Horioka, 2014. "Why Do People Leave Bequests? For Love or Self-Interest? Evidence from a New International Survey of Bequest Plans," UP School of Economics Discussion Papers 201406, University of the Philippines School of Economics.

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