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The Effects of Income and Wealth on Time and MOney Transfers Between Parents and Children

  • Joseph G. Altonji
  • Fumio Hayashi
  • Laurence Kotlikoff

We use the 1988 (Panel Study of Income Dynamics (PSID) to study the effects of income and wealth on transfers of money and time between individuals and their parents as well as the effects of incomes of other relatives on these flows. We relate the relative incomes of parents and parents in-law to transfer amounts given andreceived by married couples. We also study how the relative incomes of divorced parents influence transfers. We find that money transfers tend to reduce inequality in household incomes and that time transfers are only weakly related to income differences. Richer siblings give more to parents and receive less. Among parents and parents in-law the richer set of parents is more likely to give money and less likely to receive money. The same is true of divorced parents. In contrast to the implications of simple exchange models of transfers, there is little evidence in the cross section or in the analysis using siblings that parental income or wealth raises time transfers from children or that time transfers are exchanged for money transfers. In the cross section and among siblings, the strong negative relationship between time transfers and distance from parents is not associated with a strong negative relationship between distance and money transfers. We discuss the implications of our results for alternative models of transfers.

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Paper provided by Institute for Policy Resarch at Northwestern University in its series IPR working papers with number 96-5.

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Handle: RePEc:wop:nwuipr:96-5
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  1. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-98, December.
  2. Cox, Donald, 1990. "Intergenerational Transfers and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 187-217, February.
  3. IOANNIDESÂ , Yannis & KANÂ , Kamhon, 1994. "The Nature of Two-Direction Intergenerational Transfers of Money and Time : An Empirical Analysis," CORE Discussion Papers 1994033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. William G. Gale & John Karl Scholz, 1994. "Intergenerational Transfers and the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 145-160, Fall.
  5. 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.
  6. Schoeni, Robert F, 1997. "Private Interhousehold Transfers of Money and Time: New Empirical Evidence," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(4), pages 423-48, December.
  7. 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.
  8. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
  9. Hayashi, Fumio & Altonji, Joseph & Kotlikoff, Laurence, 1996. "Risk-Sharing between and within Families," Econometrica, Econometric Society, vol. 64(2), pages 261-94, March.
  10. Schoeni, Robert F, 2002. " Does Unemployment Insurance Displace Familial Assistance?," Public Choice, Springer, vol. 110(1-2), pages 99-119, January.
  11. Kathleen McGarry & Robert F. Schoeni, 1994. "Transfer Behavior: Measurement and the Redistribution of Resources within the Family," NBER Working Papers 4607, National Bureau of Economic Research, Inc.
  12. Menchik, Paul L, 1980. "Primogeniture, Equal Sharing, and the U. S. Distribution of Wealth," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 299-316, March.
  13. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
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