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Parental altruism under imperfect information: Theory and evidence

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  • Ernesto Villanueva

Abstract

Can we reconcile the predictions of the altruism model of the family with the evidence on parental monetary transfers in the US? This paper provides a new assessment of this question. I expand the altruism model by introducing effort of the child and by relaxing the assumption of perfect information of the parent about the labor market opportunities of the child. First, I solve and simulate a model of altruism and labor supply under imperfect information. Second, I use cross-sectional data to test the following prediction of the model: Are parental transfers especially responsive to the income variations of children who are very attached to the labor market? The results of the analysis suggest that imperfect information accounts for many of the patterns of intergenerational transfers in the US.

Suggested Citation

  • Ernesto Villanueva, 2001. "Parental altruism under imperfect information: Theory and evidence," Economics Working Papers 566, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2002.
  • Handle: RePEc:upf:upfgen:566
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    Cited by:

    1. Altonji Joseph G & Villanueva Ernesto, 2007. "The Marginal Propensity to Spend on Adult Children," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-52, February.
    2. Elin Halvorsen & Thor O. Thoresen, 2011. "Parents' Desire to Make Equal Inter Vivos Transfers," CESifo Economic Studies, CESifo, vol. 57(1), pages 121-155, March.
    3. Mohamed Jellal & FranÁois-Charles Wolff, 2003. "Leaving Home as a Self-selection Device," Economica, London School of Economics and Political Science, vol. 70(279), pages 423-438, August.
    4. Ana Fernandes, 2011. "Altruism, labor supply and redistributive neutrality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1443-1469, October.
    5. Javier OLIVERA ANGULO, 2011. "The division of parental transfers in Europe," Working Papers Department of Economics ces11.20, KU Leuven, Faculty of Economics and Business, Department of Economics.
    6. François-Charles Wolff, 2006. "Parental transfers and the labor supply of children," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(4), pages 853-877, October.
    7. Jellal, Mohamed, 2009. "Family Capitalism Corporate Governance Theory," MPRA Paper 17886, University Library of Munich, Germany.
    8. Rob Alessie & Viola Angelini & Giacomo Pasini, 2014. "Is It True Love? Altruism Versus Exchange in Time and Money Transfers," De Economist, Springer, vol. 162(2), pages 193-213, June.
    9. Fernandes, A., 2000. "Altruism with Endogenous Labor Supply," Papers 0002, Centro de Estudios Monetarios Y Financieros-.
    10. Jellal, Mohamed, 2014. "A theory of family education incentives and inequality," MPRA Paper 57913, University Library of Munich, Germany.
    11. Yang-Ming Chang, 2009. "Strategic altruistic transfers and rent seeking within the family," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(4), pages 1081-1098, October.
    12. Jellal, Mohamed, 2009. "A Theory of Educational Inequality Family and Agency Costs," MPRA Paper 17434, University Library of Munich, Germany.
    13. Aysegül Sahin, 2004. "The incentive effects of higher education subsidies on student effort," Staff Reports 192, Federal Reserve Bank of New York.

    More about this item

    Keywords

    Altruism; intergenerational transfers; private information;

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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