Family Transfers Involving Three Generations

Luc Arrondel and Andre Masson

Scandinavian Journal of Economics, 2001, vol. 103, issue 3, 415-443

Abstract: Most models of family transfers consider only two generations and focus on two motives: altruism and exchange. They also assume perfect substitution between inter‐vivos downward transfers and bequests. Based on French evidence, we show that parent‐to‐child transfers belong to three distinct categories (investment in child's education, financial assistance, wealth transmission), and advocate a three‐generation framework. Thus, transfer behavior of parents toward their children is strongly influenced by the behavior of their own parents. There is also some evidence of the Cox and Stark demonstration effect: parents help their own parents, expecting to receive comparable support from their children. Such behavior can be regarded as indirect reciprocity: the beneficiary does not give back to the initial giver but to a third person of another generation. JEL classification: D10; D31; D63; D64

Date: 2001
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https://doi.org/10.1111/1467-9442.00253

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Working Paper: Family Transfers Involving Three Generations (1999)
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