Are Family Transfers Crowded Out by Public Transfers?

Werner GÜth, Theo Offerman, Jan Potters, Martin Strobel and Harrie A. A. Verbon

Scandinavian Journal of Economics, 2002, vol. 104, issue 4, 587-604

Abstract: We give an account of an overlapping–generations experiment with multiple families in which voluntary transfers can take the form of support to the elderly or grants to children. Support to the old is a purely intergenerational (intra–family) transfer, whereas grants to children also involve an element of intra–generational (inter–family) redistribution through a compulsory pension system. Our data show that higher compulsory inter–family transfers lead subjects to place relatively more emphasis on support instead of grants: grants are crowded out, but support is not significantly affected. The efficiency of voluntary transfers increases, however. Furthermore, if subjects give transfers, they do not use tokens of direct reciprocity; evidence of indirect reciprocity in transfer behavior can only be obtained for the case where compulsory transfers are high. JEL classification: C91; H55

Date: 2002
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https://doi.org/10.1111/1467-9442.00303

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Working Paper: Are family transfers crowded out by public transfers? (2002)
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