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When you need it or when I die? Timing of monetary transfers from parents to children

Author

Listed:
  • Giacomo Pasini

    (Department of Economics, University Of Venice CÃ Foscari)

  • Rob Alessie

    (University of Groningen Faculty of Economics and Business)

  • Adriaan Kalwij

    (School of Economics Universiteit Utrecht)

Abstract

This paper investigates the timing of wealth transfers between generations. We develop an overlapping generations model in which each generation can borrow against its future income but not against expected bequest. As a result, generations relatively poorer than their parents may end up not smoothing consumption. We prove that if wealth transfers can take place earlier in life, then each generation smooths consumption despite the constraint on borrowing and the first best solution is restored. The model implies that parents transfer resources when the children are credit constrained. This implication is tested using Dutch survey data on households' intentions to make intervivos transfers matched with administrative data that allow to construct a measure of the probability of being in need of a transfer. All in all, the paper highlights the importance of intervivos transfers as a device that households can resort to in order to mitigate inter-generational wealth inequalities.

Suggested Citation

  • Giacomo Pasini & Rob Alessie & Adriaan Kalwij, 2016. "When you need it or when I die? Timing of monetary transfers from parents to children," Working Papers 2016:34, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2016:34
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    References listed on IDEAS

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    More about this item

    Keywords

    intervivos transfers; credit constraints; overlapping generations;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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