When you need it or when I die? Timing of monetary transfers from parents to children

Giacomo Pasini, Rob Alessie and Adriaan Kalwij

Research in Economics, 2024, vol. 78, issue 3

Abstract: The standard overlapping generations model assumes the ability to borrow against bequests. If this assumption is not met, it may happen that not all generations smooth their consumption over time. We prove that by allowing for inter vivos transfers in this latter situation, all generations smooth consumption, i.e. the first best solution is restored. Next, using a combination of Dutch survey and administrative data, we provide empirical support for the model's implication that parents transfer wealth when their children need to borrow out of future resources. Our findings suggest an instrumental role for inter vivos transfers as a device that generations can resort to for smoothing their consumption over time.

Keywords: Inter vivos transfers; Credit constraints; Overlapping generations (search for similar items in EconPapers)
JEL-codes: D12 D13 D91 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:78:y:2024:i:3:s1090944324000383

DOI: 10.1016/j.rie.2024.100974

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