Family Transfers Involving Three Generations

Abstract

Most models of family transfers consider only two generations and focus on two motives: altruism and exchange. They also assume perfect substitution between inter-vivos downward transfers and bequests. Based on French evidence, we show that parent-to-child transfers belong to three distinct categories (investment in child's education, ®nancial assistance, wealth transmission), and advocate a three-generation framework. Thus, transfer behavior of parents toward their children is strongly in¯uenced by the behavior of their own parents. There is also some evidence of the Cox and Stark demonstration effect: parents help their own parents, expecting to receive comparable support from their children. Such behavior can be regarded as indirect reciprocity: the bene®ciary does not give back to the initial giver but to a third person of another generation.

European patterns of intergenerational financial and time transfers

“…The expansion of further education has implications for parents as well as children, and investing in the education of children is now a preoccupation of most parents (Attias-Donfut and Wolff 2000b; Arrondel and Masson 2001). The transfer of money and time-related resources by adult children to their elderly parents depends not only on the needs of their parents, but also on the situation of the adult child.…”

How do middle-aged children allocate time and money transfers to their older parents in Europe?

“…McGarry and Schoeni (1995) also used the HRS and show that the household income of the respondent is positively associated to financial transfers to parents, while there is no significant impact on time assistance given. Arrondel and Masson (2001) analyse upward financial and time transfers from French data (the ''Caisse Nationale d'Assurance Vieillesse'' survey) using a bivariate probit and find no sign of substitution between financial and time transfers made by adult children to their parents. This paper analyses the determinants of financial and time transfers from adult children to their elderly parents in Europe by using the Survey of Health, Ageing and Retirement in Europe (SHARE).…”

Family Events and the Timing of Intergenerational Transfers

“…Arrondel and Masson (2001) proposed a more refined life-cycle typology of early human capital investments, later cash assistance, and eventual wealth transmissions that have different determinants and correspond to different transfer motives. This typology, however, refers to the age of the child rather than considering specific events in the child's life course.…”