Are Family Transfers Crowded Out by Public Transfers?

18 Pages Posted: 19 May 2003

See all articles by Werner Guth

Werner Guth

Max Planck Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE)

Johannes (Jan) J. M. Potters

Tilburg University - CentER

Martin Strobel

Maastricht University - Department of Economics; Maastricht University - International Institute of Infonomics

Harrie A. A. Verbon

Tilburg University - CentER; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

We give an account of an overlapping-generations experiment with multiple families in which voluntary transfers can take the form of support to the elderly or grants to children. Support to the old is a purely intergenerational (intra-family) transfer, whereas grants to children also involve an element of intra-generational (inter-family) redistribution through a compulsory pension system. Our data show that higher compulsory inter-family transfers lead subjects to place relatively more emphasis on support instead of grants: Grants are crowded out, but support is not significantly affected. The efficiency of voluntary transfers increases, however. Furthermore, if subjects give transfers, they do not use tokens of direct reciprocity; evidence of indirect reciprocity in transfer behavior can only be obtained for the case where compulsory transfers are high.

Keywords: Experiments, with-in family transfers, overlapping generations, redistributive public-pension system, crowding out, reciprocity

JEL Classification: C91, H55

Suggested Citation

Güth, Werner and Offerman, Theo and Potters, Johannes (Jan) J. M. and Strobel, Martin and Verbon, Harrie A. A., Are Family Transfers Crowded Out by Public Transfers?. Scandinavian Journal of Economics, Vol. 104, No. 4, pp. 587-604, 2002. Available at SSRN: https://ssrn.com/abstract=371857

Werner Güth (Contact Author)

Max Planck Institute of Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4294 (Phone)
+31 20 525 5283 (Fax)

Johannes (Jan) J. M. Potters

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 8204 (Phone)
+31 13 466 3042 (Fax)

Martin Strobel

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 (0)43 38-83646 (Phone)
+31 (0)43 38-84878 (Fax)

HOME PAGE: http://Martin.Strobel.infonomics.nl

Maastricht University - International Institute of Infonomics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 (0)43 38-83885 (Phone)
+31 (0)43 38-84905 (Fax)

HOME PAGE: http://Martin.Strobel.infonomics.nl

Harrie A. A. Verbon

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 28 78 (Phone)
+31 13 466 30 42 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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