Parental Altruism and Inter Vivos Transfers: Theory and Evidence

59 Pages Posted: 19 Jul 2000 Last revised: 24 Sep 2010

See all articles by Joseph G. Altonji

Joseph G. Altonji

Yale University - Economic Growth Center; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Fumio Hayashi

National Graduate Institute for Policy Studies; Harvard University - Department of Economics

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Multiple version iconThere are 2 versions of this paper

Date Written: December 1995

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.

Suggested Citation

Altonji, Joseph G. and Hayashi, Fumio and Kotlikoff, Laurence J., Parental Altruism and Inter Vivos Transfers: Theory and Evidence (December 1995). NBER Working Paper No. w5378. Available at SSRN: https://ssrn.com/abstract=225440

Joseph G. Altonji (Contact Author)

Yale University - Economic Growth Center ( email )

Box 208269
New Haven, CT 06520-8269
United States

National Bureau of Economic Research (NBER)

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Yale University - Cowles Foundation

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Fumio Hayashi

National Graduate Institute for Policy Studies ( email )

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Tokyo, 106-0032
Japan

HOME PAGE: http://https://sites.google.com/site/fumiohayashi/home

Harvard University - Department of Economics

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United States

Laurence J. Kotlikoff

Boston University - Department of Economics ( email )

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Boston, MA 02215
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617-353-4002 (Phone)
617-353-4449 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Gaidar Institute for Economic Policy

Gazetny per. 5-3
Moscow, 125993
Russia

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