Parental
Altruism and Inter Vivos Transfers: Theory and Evidence
Joseph G. Altonji, Fumio
Hayashi, and Laurence Kotlikoff
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 altrusim
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 altrusim 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.
Joseph G. Altonji, Department
of Economics, Northwestern University Fumio Hayashi, Department of Economics, Columbia University Laurence Kotlikoff, Department of Economics, Boston University
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