How Widespread are Non-linear Crowding Out Out Effects? The Response of Private Transfers to Income in Four Developing Countries
This paper investigates whether there is a non-linear relationship between income and the private transfers received by households in developing countries. If private transfers are unresponsive to household income, expansion of public social security and other transfer programs is unlikely to crowd out private transfers, contrary to concerns first raised by Barro and Becker. There is little existing evidence for crowding out effects in the literature, but this may be because they have been obscured by methods that ignore non-linearities. If donors switch from altruistic motivations to exchange motivations as recipient income increases, a sharp non-linear relationship between private transfers and income may result. In fact, threshold regression techniques find such non-linearity in the Philippines and after accounting for these there is evidence of serious crowding out, with 30 to 80 percent of private transfers potentially displaced for low-income households [Cox, Hansen and Jimenez 2004, 'How Responsiveare Private Transfers to Income?' Journal of Public Economics]. To see if these non-linear effects occur more widely, semiparametric and threshold regression methods are used to model private transfers in four developing countries - China, Indonesia, Papua New Guinea and Vietnam. The results of our paper suggest that non-linear crowding-out effects are not important features of transfer behaviour in these countries. The transfer derivatives under a variety of assumptions only range between 0 and -0.08. If our results are valid, expansions of public social security to cover the poorest households need not be stymied by offsetting private responses.
|Date of creation:||31 Mar 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Private Bag 3105, Hamilton, New Zealand, 3240|
Phone: + 64 (0)7 838 4758 (Administrator)
Fax: + 64 7 838 4331
Web page: http://cms.mngt.waikato.ac.nz/departments/economics
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June.
- Yatchew,Adonis, 2003.
"Semiparametric Regression for the Applied Econometrician,"
Cambridge University Press, number 9780521012263, November.
- Yatchew,Adonis, 2003. "Semiparametric Regression for the Applied Econometrician," Cambridge Books, Cambridge University Press, number 9780521812832, November.
- Maitra, Pushkar & Ray, Ranjan, 2003. "The effect of transfers on household expenditure patterns and poverty in South Africa," Journal of Development Economics, Elsevier, vol. 71(1), pages 23-49, June.
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Lampman, Robert J & Smeeding, Timothy M, 1983. "Interfamily Transfers as Alternatives to Government Transfers to Persons," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 29(1), pages 45-66, March.
- Giorgio Secondi, 1997. "Private monetary transfers in rural china: Are families altruistic?," Journal of Development Studies, Taylor & Francis Journals, vol. 33(4), pages 487-511.
- Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1995.
"Parental Altruism and Inter Vivos Transfers: Theory and Evidence,"
Boston University - Institute for Economic Development
65, Boston University, Institute for Economic Development.
- Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1121-66, December.
- Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, 1995. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," NBER Working Papers 5378, National Bureau of Economic Research, Inc.
- Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, . "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," IPR working papers 95-22, Institute for Policy Resarch at Northwestern University.
- Gary S. Becker, 1974.
"A Theory of Social Interactions,"
NBER Working Papers
0042, National Bureau of Economic Research, Inc.
- Bruce E. Hansen, 2000.
"Sample Splitting and Threshold Estimation,"
Econometric Society, vol. 68(3), pages 575-604, May.
- Olken, Benjamin A., 2005. "Revealed community equivalence scales," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 545-566, February.
- Cox, Donald & Jakubson, George, 1995. "The connection between public transfers and private interfamily transfers," Journal of Public Economics, Elsevier, vol. 57(1), pages 129-167, May.
When requesting a correction, please mention this item's handle: RePEc:wai:econwp:06/01. 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: (Brian Silverstone)
If references are entirely missing, you can add them using this form.