Do Parents Propagate Income Inequality among Children? Evidence from Chinese and Swedish Twins

69 Pages Posted: 18 Nov 2021

See all articles by Aiday Sikhova

Aiday Sikhova

The Ohio State University

Sven Oskarsson

affiliation not provided to SSRN

Rafael Ahlskog

affiliation not provided to SSRN

Date Written: May 2, 2018

Abstract

In this paper we provide comprehensive evidence on the role of parents in driving within-family income inequality by considering the dynamic nature of parent-child relationships throughout children’s entire lives. Specifically, we examine three important mechanisms through which parents may impact the children: investment in education, inter vivos transfers, and bequests. Since parental investment and transfer behaviors may depend on their country of residence, to assess generalizability of our estimates, we focus the analysis on families from China and Sweden – countries that differ in the level of socio–economic development and demographic characteristics. Accounting for endogeneity of parental behaviors, we find that Chinese parents tend to reinforce income inequality between the children using inter vivos transfers: a 10% increase in a twin child’s salary at the time of transfer increases inter vivos transfers by 8.7%. Swedish parents, on the other hand, tend to invest, transfer, and bequeath equal amounts to both children. Given considerable differences between Chinese and Swedish parents in their attitudes towards within-family income inequality, we demonstrate that these differences can be largely explained by differences in parental education levels in the two countries.

Keywords: Intrahousehold Allocation; Personal Income, Wealth, and Their Distributions; Intergenerational Transfers

JEL Classification: D13, D31, D64, I24, J12, J13, O15

Suggested Citation

Sikhova, Aiday and Oskarsson, Sven and Ahlskog, Rafael, Do Parents Propagate Income Inequality among Children? Evidence from Chinese and Swedish Twins (May 2, 2018). Available at SSRN: https://ssrn.com/abstract=3962998 or http://dx.doi.org/10.2139/ssrn.3962998

Aiday Sikhova (Contact Author)

The Ohio State University ( email )

1945 N High St.
405 Arps Hall
Columbus, OH 43201
United States

Sven Oskarsson

affiliation not provided to SSRN

Rafael Ahlskog

affiliation not provided to SSRN

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