When You Need It or When I Die? Timing of Monetary Transfers from Parents to Children

55 Pages Posted: 29 Nov 2016

See all articles by Giacomo Pasini

Giacomo Pasini

Ca' Foscari University of Venice; Netspar

Rob J. M. Alessie

University of Groningen; Netspar; Tilburg University - Center for Economic Research (CentER)

Adriaan Kalwij

Utrecht University

Date Written: November 25, 2016

Abstract

This paper investigates the timing of wealth transfers between generations. We develop an overlapping generations model in which each generation can borrow against its future income but not against expected bequest. As a result, generations relatively poorer than their parents may end up not smoothing consumption. We prove that if wealth transfers can take place earlier in life, then each generation smooths consumption despite the constraint on borrowing and the first best solution is restored. The model implies that parents transfer resources when the children are credit constrained. This implication is tested using Dutch survey data on households' intentions to make intervivos transfers matched with administrative data that allow to construct a measure of the probability of being in need of a transfer. All in all, the paper highlights the importance of intervivos transfers as a device that households can resort to in order to mitigate inter-generational wealth inequalities.

Keywords: intervivos transfers, credit constraints, overlapping generations

JEL Classification: D12, D13, D91

Suggested Citation

Pasini, Giacomo and Alessie, Rob J. M. and Kalwij, Adriaan, When You Need It or When I Die? Timing of Monetary Transfers from Parents to Children (November 25, 2016). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 34/WP/2016, Available at SSRN: https://ssrn.com/abstract=2876460 or http://dx.doi.org/10.2139/ssrn.2876460

Giacomo Pasini (Contact Author)

Ca' Foscari University of Venice ( email )

Cannaregio 873
Venice, 30121
Italy
+39 041 234 9171 (Phone)
+39 041 2349176 (Fax)

HOME PAGE: http://https://sites.google.com/unive.it/pasini

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl/people/researchfellows/pasini/

Rob J. M. Alessie

University of Groningen ( email )

P.O. box 800
9700 AV Groningen
Netherlands
050-3637240 (Phone)

HOME PAGE: http://members.chello.nl/~r.j.m.alessie

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl

Tilburg University - Center for Economic Research (CentER)

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Adriaan Kalwij

Utrecht University ( email )

Janskerkhof 12
Utrecht, 3512 BL
Netherlands

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