An Experimental Study on the Crowding-Out Effect of Public Transfers in a Model with Multiple Families

Abstract

We study an overlapping-generations experiment with multiple families in which redistributional transfers can take the form of support to the elderly or grants to children. Supporting the old is a purely inter-generational (intra-family) transfer, whereas grants to children also involve an element of intra-generational (inter-family) solidarity. Our treatment variable is the tax rate determining the amount of redistribution by means of the compulsory pension scheme. We investigate to which degree compulsory solidarity crowds out voluntary solidarity. We also consider whether voluntary solidarity relies more on grants to children or on support to the old aged, and the mechanisms which are used in eliciting transfers from family members from other generations.

Keywords: Within-Family Transfers, Overlapping Generations, Redistributive Public-Pension System, Crowding Out of Private Transfers, Reciprocity

JEL Classification: C91, H55