Parental Altruism and Inter Vivos Transfers: Theory and Evidence

Joseph G. Altonji, Fumio Hayashi and Laurence Kotlikoff ()

No 5378, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses PSID data on the extended family to test whether inter vivos transfers from parents to children are motivated by altruism. Specifically, the paper tests whether an increase by one dollar in the income of parents actively making transfers to a child coupled with a one dollar reduction in that child's income results in the parents increasing their transfer to the child by one dollar. This restriction on parental and child transfer-income derivatives is derived for the standard altruism model augmented to include uncertain and liquidity constraints. These additional elements pin down the timing of inter vivos transfers. The paper's method of estimating income-transfer derivatives takes into account unobserved heterogeneity across families in the degree of altruism. The findings strongly reject the altruism hypothesis. Redistributing one dollar from a recipient child to donor parents leads to less than a 13 cent increase in the parents' transfer to the child -- far less than the one dollar increase implied by altruism.

JEL-codes: D10 D91 (search for similar items in EconPapers)
Date: 1995-12
Note: LS PE
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Related works:
Working Paper: Parental Altruism and Inter Vivos Transfers: Theory and Evidence (1995)
Working Paper: Parental Altruism and Inter Vivos Transfers: Theory and Evidence
Journal Article: Parental Altruism and Inter Vivos Transfers: Theory and Evidence (1997)
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