asset pricing implications of pareto optimality with private information we compare the empirical performance of a standard incomplete markets asset pricing model with that of a novel model with constrained pareto optimal allocations we represent the models stochastic discount factors in terms of the cross sectional distribution of consumption and use these representations to evaluate the models empirical implications the first model is inconsistent with the equity premium in the united states united kingdom and italy the second model is consistent with the equity premium and the risk free rate in all three countries if the coefficient of relative risk aversion is roughly 5 and the quarterly discount factor is less than 0 5

the role of permanent income and demographics in black white differences in wealth we explore the extent to which the large race gap in wealth can be explained with properly constructed income and demographic variables in some instances we explain the entire wealth gap with income and demographics provided that we estimate the wealth model on a sample of whites however we typically explain a much smaller fraction when we estimate the wealth model on a black sample using sibling fixed effects models to control for intergenerational transfers and the effects of adverse history we find that these factors are not likely to account for the lower explanatory power of the black wealth models our analysis of growth models of wealth suggests that differences in savings behavior and or rates of return play an important role

dynamic relationship between financial development energy consumption trade and greenhouse gas comparison of upper middle income countries from asia europe africa and america the paper explores the nexus between greenhouse gas financial development energy consumption trade and urbanization in 34 upper middle income countries from asia europe africa and america south and north by using panel data from 2001 to 2014 vector error correction model explored different results for different regions such as the causality of greenhouse gas for europe and america financial development for asia trade openness for asia europe and america and urbanization for africa and america the causality of greenhouse gas emission was bi directional with urbanization in america and trade in europe the bi directional causality of trade was observed with financial development in asia and urbanization in africa the generalized method of moment and fully modified ordinary least square explored a direct association of per capita greenhouse gas emission with financial development in europe energy consumption in all panels and renewable energy in africa and america but the relationship of per capita emission was reciprocal with financial development in asia africa and america renewable energy in europe trade in europe africa and america and urbanization in asia europe and america the relationship of variables changes from region to region and country to country a country based reciprocal effect on per capita greenhouse gas was observed for financial development renewable energy trade openness and urbanization for different countries this paper provides an insight to policy makers to re structure the financial system energy usage pattern trade and urbanization in accordance with the cleaning of environment at country and regional level

bequests and informal long term care evidence from hrs exit interviews informal long term caregiving for frail elderly individuals by their children may induce parents to compensate their children for their help to test this hypothesis i use the exit interview from the health and retirement study hrs my results show that the decision to care for one s parents has a significant positive impact on the incidence and amount of bequests received in addition increasing the amount of care relative to one s siblings significantly increases the proportion of bequest within a family furthermore i find that the positive nexus of caregiving and bequest requires a written will as a contract between the parent and the helping child

transfer behavior in the health and retirement study measurement and the redistribution of resources within the family recent work by a number of economists has opened a debate about the role played by intergenerational transfers using the new health and retirement study hrs we are better able to address the issues involved contrary to the current literature on bequests we do not find that parents give transfers equally to all children rather we find that in the case of inter vivos transfers respondents give greaterfinancial assistance to their less well off children than to their children with higher incomes financial transfers to elderly parents are also found to be negatively related to the potential recipient s income these results hold both for the incidence of transfers and for the amounts in addition we allow for unobserved differences across families by estimating fixed effect models and find our results to be robust to these specifications a comparison of the hrs transfer data to other survey data demonstrates that the hrs is potentially quite useful for research on transfer behavior

understanding overbidding in second price auctions an experimental study we present results from second price private value auction spa experiments where bidders may receive noisy signals about their opponentsvalue such signals change biddersperception about the strengthof their opponent and the relationship between biddersperception of their opponent and overbidding provides a novel channel to understand overbidding in spa we found that small and medium overbids are more likely to occur when bidders perceive their rivals to have similar values supporting a modifiedjoy of winninghypothesis but large overbids are more likely to occur when bidders believe their opponents to have much higher values consistent with thespite hypothesis second price private value auctions spas are the most easily understood auction format from a theoretical point of view 1 in standard private value auction models of fully rational bidders with standard preferences bidding one s own value is a weakly dominant strategy this theoretical prediction holds irrespective of biddersrisk atti tudes the number of rival bidders symmetry in the value distributions and so on in laboratory experiments however subjects are found to exhibit a consistent pattern of overbidding kagel et al 1987 found that the actual bids are on average 11 above the dominant strategy bids kagel and levin 1993 found that about 62 of all bids in their five bidder spa sessions exceed the bidder s value while only 8 of all bids were below it both kagel and levin 1993 and harstad 2000 further reported that experience has only a small effect in reducing overbidding in spa an important related finding is that overbidding in english auctions a mechanism that is strategically equivalent to the spa in the case of private values is known to be a short term phenomenon that subjects quickly learn not to undertake kagel and levin 1993 thus any explanation for the prevalence and persistence of overbidding in the spa must also explain its rarity in the english auction given the robustness of the findings of overbidding in spa it is surprising that economists have little understanding of why it happens kagel et al 1987 conjectured that bidding above one s own value in a spa is based on the illusion that it improves the probability of winning with little cost because the winner only pays the second highest bid 2 moreover they argue that overbidding is sustainable because bidders still on average earn positive profits and because the negative feedback from overbidding is a weak mechanism in the spa for example if a bidder overbids in a spa by 10 above her value it is quite possible that she does not win at all and thus does not experience

parental human capital investment and old age transfers from children is it a loan contract or reciprocity for indonesian families abstract this paper proposes two alternative models of intergenerational transfers linking parental investment in human capital of children to old age support the first model formulates these transfers as a pure loan contract and the second model as self enforcing reciprocity both models predict neutrality of intergenerational redistribution of resources within the family also known as the difference in income transfer derivatives property two models however provide different reasons for the failure of this property and yield different policy implications for parental human capital investment and provision of old age support specification tests on the indonesian family life survey data reject the pure loan model in favor of the reciprocity model the estimated difference in income transfer derivatives for this data is found to be significantly higher than the difference estimated by altonji hayashi and kotlikoff altonji et al 1992 altonji j g hayashi f and kotlikoff l j 1992 is the extended family altruistically linked direct tests using micro data the american economic review vol 82 5 1177 98 for the u s psid data

compensatory inter vivos gifts parents transfer motives are important for understanding e g macroeconomics income re distribution savings and public finance using data from six biennial waves of the health and retirement study 1992 2002 we estimate censored regression models with nested multilevel error components first we interpret our findings that inter vivos transfers from parents to children are gifts rather than temporary help to overcome liquidity constraints second inter vivos gifts are compensatory in the sense that lifetime poorer children will receive higher transfers than their lifetime richer siblings third inter vivos gifts do not however make up the entire difference in lifetime incomes copyright 2009 john wiley sons ltd

inter vivos transfers and intergenerational exchange the surge of interest in intergenerational transfers in the past decade has sparked a debate over the motivation for them are transfers given out of altruism or part of an exchange while each motive is probably at work to some extent we know little about whether one motive predominates the question is relevant for issues concerning public income redistribution and inequality in the family but despite its importance empirical evidence about motives is scarce because of limited data we investigate a new data set the national survey of families and households which remedies many of the shortcomings of other data sets containing private transfer information we find that empirical patterns for inter vivos transfers i e transfers between living persons are more consistent with exchange than altruism

pension coverage for parents and educational investment in children evidence from urban china when social security is established to provide pensions to parents their reliance upon children for future financial support decreases and their need to save for retirement also falls in this study the expansion of pension coverage from the state sector to the non state sector in urban china is used as a quasi experiment to analyze the intergenerational impact of social security on education investments in children in a difference in differences framework a significant increase in the total education expenditure is found to be attributable to pension expansion the results are unlikely to be driven by other observable trends they are robust to the inclusion of a large set of control variables and to different specifications including one based on the instrumental variable method

the timing and division of parental transfers to children abstract we find parents divide various assets differently among children inter vivos transfers cash gifts and co residence are made preferentially to poorer children in contrast transfers made at death insurance benefits and wills are awarded to children irrespective of income differences

forecasting the liquidity of very small private companies abstract short term liquidity of very small private companies vspcs is important to creditors as any cash shortages result in opportunity costs due to delayed payments we use a publicly available liquidity indicator for 19 627 slovenian vspcs as a special but generalizable case of credit record data and financial ratios to predict possible cash shortages indicator is predicted and used in lagged form s as a predictive variable with without financial ratios allowing comparisons models including financial ratios are less efficient than models based on lagged liquidity indicator alone surprisingly combined models perform only marginally better despite high overall accuracy misclassification of companies experiencing cash shortages is high

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

inter vivos transfers and bequests in three oecd countries reforms reducing the generosity of pensions have distributional effects on future generations if individuals care about their descendants welfare but only affect elderly individuals if bequests are the unintentional result of precautionary savings and safety net programmes such as unemployment insurance may displace sources of private help such as that provided by living parents to their children in need this paper provides comparable measures of how expected bequests and transfers vary with cumulated parental earnings in the united states west germany and the united kingdom the strength of bequest motives is empirically very weak in the available data private inter vivos transfers which appear to depend on the recipients economic situation are partly crowded out by public unemployment insurance programmes together involuntary bequests and intentional inter vivos transfers appear to be an important channel of intergenerational inequality transmission and strengthen substantially the relationship between an individual s and his parents economic status ernesto villanueva

effects of individual development accounts on asset purchases and saving behavior evidence from a controlled experiment abstract we evaluate the first controlled field experiment on individual development accounts idas including their own contributions and matching funds treatment group members in the tulsa oklahoma program could accumulate 6750 for home purchase or 4500 for other qualified uses almost all treatment group members opened accounts but many withdrew all funds for unqualified purposes among renters at the beginning of the experiment the ida increased homeownership rates after 4 years by 7 11 percentage points and reduced non retirement financial assets by 700 1000 the ida had almost no other discernable effect on other subsidized assets overall wealth or poverty rates

intergenerational household formation female labor supply and informal caregiving a bargaining approach children s provision of in kind services to their elderly parents informal caregiving represents an important form of economic transfers to the elderly in this paper we develop and estimate a joint model of informal caregiving and labor force participation decisions of adult daughters who have a frail elderly parent in a broader framework of intergenerational household formation parent and daughter agree to a nash bargaining rule as the solution to the household formation and intrahousehold decision making process however rather than severed relationships the threat point is given by a noncooperative equilibrium defined in terms of voluntary contributions toward a public good the parental well being maximum likelihood parameter estimates derived from the simultaneous multiequation endogenous switching model are generally consistent with expectations our results indicate that competing demands on daughters time reduce both coresidence and informal caregiving we also find that intergenerational coresidence is an important mode of assistance to elderly persons a simulation based on the estimated parameters suggests that public programs designed to meet the long term care needs of elderly persons by subsidizing formal home care services may have substantial effects on intergenerational living and care arrangement decisions

inter vivos transfers and intended bequests abstract empirical work on intergenerational transfers has focused on distinguishing between altruistic and exchange motivated behavior however these two models are unable to explain the strong tendency for inter vivos transfers to be negatively related to the income of the recipient while bequests bear no relationship to income this paper presents a new framework for analyzing transfers from parents to children that is more consistent with observed behavior than are the altruistic and exchange models alone in particular the model developed here predicts differing behavior with respect to inter vivos transfers and bequests due to liquidity constraints and uncertainty about the recipient s permanent income the empirical work uses data from the health and retirement study and the asset and health dynamics study the patterns observed in these data are consistent with earlier findings that inter vivos transfers go disproportionately to less well off children while bequests are divided equally across children further the results support the predictions of the model in that differences in inter vivos transfers arise from differences in current income while differences in bequests result when indicators of the children s permanent incomes differ

crowding out of private support to the elderly evidence from a demogrant in mexico abstract to examine whether private support dampens or reinforces the impact of redistributive policies this paper estimates the effect of an exogenous increase in the income of the elderly caused by a recent demogrant in mexico on the amount of private transfers they receive my instrumental variables strategy overcomes the endogeneity of income that typically contaminates estimates and unlike related studies that use natural or policy experiments in reduced form estimations it yields evidence of a positive bias this suggests that an unobservable characteristic is positively correlated both with income and private transfer receipt and that treating income as exogenous could lead to an underestimation of the crowding out effect in contrast my preferred estimates are negative significant and not far from minus one implying an almost complete crowding out my findings suggest that private transfers could neutralize the changes in the public transfers for the elderly

neuroeconomic foundations of economic choice recent advances neuroeconomics combines methods and theories from neuroscience psychology economics and computer science in an effort to produce detailed computational and neurobiological accounts of the decision making process that can serve as a common foundation for understanding human behavior across the natural and social sciences because neuroeconomics is a young discipline a sufficiently sound structural model of how the brain makes choices is not yet available however the contours of such a computational model are beginning to arise and given the rapid progress there is reason to be hopeful that the field will eventually put together a satisfactory structural model this paper has two goals first we provide an overview of what has been learned about how the brain makes choices in two types of situations simple choices among small numbers of familiar stimuli like choosing between an apple or an orange and more complex choices involving tradeoffs between immediate and future consequences like eating a healthy apple or a less healthy chocolate cake second we show that even at this early stage insights with important implications for economics have already been gained

ricardian equivalence revisited deficits gifts and bequests barro 1974 shows that operative altruistic transfer motives are key for ricardian equivalence to hold this paper evaluates the importance of this mechanism quantitatively by studying deficit financed tax cut experiments i use a heterogeneous agents overlapping generations economy with endogenously operative transfer motives to capture the fact that empirically transfers occur in some but not in all families altruism is calibrated to match aggregate transfer statistics i find that the response of aggregate consumption to a tax cut is in the ballpark of a standard overlapping generations economy that is an economy without altruistic family links welfare implications of this economy however move closer to a dynastic economy

gifts bequests and family incentives abstract in this note we use the theory of incentive contracting to characterize the pattern of financial transfers within the family using an altruistic model based on bounded rationality with one parent and two children we show that the parent may provide a lower gift to the less well off child while bequests are always compensatory

neuroeconomics using neuroscience to make economic predictions neuroeconomics seeks to ground economic theory in detailed neural mechanisms which are expressed mathematically and make behavioural predictions one finding is that simple kinds of economising for life and death decisions food sex and danger do occur in the brain as rational theories assume another set of findings appears to support the neural basis of constructs posited in behavioural economics such as a preference for immediacy and nonlinear weighting of small and large probabilities a third direction shows how understanding neural circuitry permits predictions and causal experiments which show state dependence of revealed preference except that states are biological and neural variables

pinocchio s pupil using eyetracking and pupil dilation to understand truth telling and deception in sender receiver games we conduct laboratory experiments on sender receiver games with an incentive for senders to exaggerate such as security analyst s painting a rosy picture about earnings prospects our results show that overcommunicati on messages are more informative of the true state than they should be in equilibri um is consistent with a level k model eyetracking shows that senders look much more on the payoff rows corresponding to the true state and much less at receiver payoffs than at their own payoffs senders pupils also dilate more when their deception is larger in magnitude together these data are consistent with the hypothesis that figuring out ho w to deceive another player is cognitively difficult as assumed in the level k mod el a combination of sender messages and lookup patterns predicts the true state about t wice as often as predicted by equilibrium using these measures would enable receiver subjects to hypothetically earn up to 16 21 percent more than they actually do

using the medicare buy in program to estimate the effect of medicaid on ssi participation aaron s yelowitz this article assesses the importance of receiving supplemental health insurance on participation in supplemental security income ssi for the elderly the implementation of the qualified medicare beneficiary qmb program offered a substitute for medicaid and expanded health insurance eligibility to a higher income level using a sample of elderly respondents aged 66 to 75 i find that the qmb program reduced ssi participation more than half of the qmb participants were previously covered by ssi and medicaid the calculations suggest that the qmb program was not as expensive as it might first appear because of reductions in ssi expenditure jel h53 138 j14 i introduction the supplemental security income ssi program in the united states provides assistance to elderly blind and disabled individuals who are poor it is federally financed and administered by the social security administration although much more attention has been focused on the former aid to families with dependent children afdc program which primarily targets poor single parent families more money was spent on cash relief for ssi recipients in 1993 23 6 billion compared to 22 3 billion 1 in addition to cash ssi recipients receive supplemental health insurance coverage for medicare similar to private medigap policies through the medicaid program this provides a second important benefit to ssi recipients in fiscal year 1993 medicaid expenditure for elderly categorically needy ssi recipients amounted to 14 1 billion 2 several studies have examined the importance of health insurance for working age adults in the labor market 3 in addition the effects of recent medicaid expansions for younger populations have been extensively studied 4 little is known however about the quantitative importance of medicaid on the ssi participation of the elderly the key obstacle in assessing this effect is that until recently medicaid eligibility had been closely related to ssi eligibility in most states this study analyzes the introduction of the qualified medicare beneficiary qmb program enacted in different states from 1987 to 1992 which offered supplemental health insurance coverage to the elderly without the need to participate in ssi the qmb program offered some of the same medicare cost sharing benefits that an elderly ssi recipient would receive from medicaid including the payment of medicare premiums deductibles and copayments 5 moreover the qmb program expanded medicaid coverage to individuals with higher inc omes and assets than the ssi program 6 the primary goal of this article is to document the link between the qmb program and the decision to participate in ssi i find that raising the income limit in qmb program significantly reduces ssi participation particularly among african americans and the less educated the coefficient estimates suggest that in the absence of the qmb buy in program ssi participation would have been 45 higher in 1992 than it actually was the caseload growth in the elderly ssi population would have looked very similar to the caseload growth of the disabled 851 population a group not eligible for qmb in addition the qmb program was considerably less expensive than one would infer from simply calculating the increased health care expenditure because of reductions in ssi expenditure for cash benefits the rest of the article is arranged as follows section ii outlines some relevant features of the ssi medicaid and qmb programs in particular it reviews how the income eligibility limits for qmb and ssi are computed the difference between those limits is a measure of how closely are medicaid and ssi linked it will subsequently be used as the key independent variable in the regression analysis this section also shows the cross sectional and time series variation in the qmb program section iii models the potential effects on ssi participation of the introduction of the qmb program and considers the role of information

parental actions and sibling inequality this paper presents a simple model of resource allocation within the family the model is based on two main assumptions there are nonconvexities in human capital investments and parents cannot borrow to finance their children s education the model shows that poor and middle income parents will often find it optimal to channel human capital investments into a few of their children thus creating sizable inequalities among siblings the paper shows that the predictions of the model are consistent with the available evidence for three latin american countries d 2003 elsevier science b v all rights reserved

bequest behavior and the effect of heirs earnings testing the altruistic model of bequests that parents transfer resources to children because of altruistic concern is a reasonable a priori assumption however economic theories of altruistic transfers have produced many counterintuitive conclusions and consequently much debate when applied to bequests these theories predict that inheritances will compensate for earnings differences between siblings as well as between parents and children this paper tests these implications using a new data set centered on federal estate tax returns little support can be found for an altruistic theory of bequests this finding has implications for macroeconomic policy government transfer programs and inequality copyright 1996 by american economic association

dynamic aspects of family transfers parents transfer a great deal to their adult children and we have rich theoretical models providing a framework for these transfers however both the models and existing empirical work typically examine behavior in the cross section to date we know little about the dynamic aspects of family transfers here i examine transfers over a span of 17 years and find substantial changes in recipiency over time and a strong negative correlation between transfers and transitory income i also find that events such as job loss and divorce are strong predictors of parental transfers and although rare are typically associated with larger transfers than income alone might predict finally transfers are distributed unequally across siblings and perhaps surprisingly the distribution of transfers becomes even more unequal when examined over an extended period of time than in any single year the evidence presented here thus suggests that dynamic analyses can provide insights into behavior that are impossible to obtain in a static context

do private transfers displace the benefits of public transfers evidence from south africa abstract this paper investigates whether government transfer programs displace or crowd out private support focusing on a large increase in state old age pensions in south africa using data spanning the period of the expansion we find that each rand of public pension income to the elderly leads to a 0 25 0 30 rand reduction in private transfers from children living away from home however despite the large increase in income there were no significant changes in migration labor supply or household composition we also show that evaluations of the distributional effects of the pension are overstated when crowding out is ignored

income transfers of chinese rural migrants some empirical evidence from jinan this paper explores the determinants of migrant remittances to rural households using data on male migrant workers drawn from the jinan municipality in shandong province in the summer of 1995 the majority of migrants are found to retain close links with their rural households with 85 remitting some income in the 12 months preceding the survey date the transfers accounted for over a third of urban labour earnings a number of models are used to undertake the estimation of remittance functions no evidence of altruistic behaviour is uncovered and evidence for exchange and coinsurance theories is mixed labour earnings proved the most robust determinant of the level of remittance and the remittance wage elasticity calculated is found to be at the top end of the range of estimates obtained in the literature

the cost of equality unequal bequests and tax avoidance abstract for altruistic parents desiring to bequeath their wealth to their children estate taxes can be costly in utility terms the most straightforward way to reduce the tax burden is through inter vivos transfers taking full advantage of potential tax free giving often requires that parents differentiate between children in the amounts transferred this unequal giving contrasts sharply with the presumed desire to make equal bequests this paper examines the extent to which wealthy parents take advantage of tax free giving and whether the desire to spend down an estate is sufficient to induce unequal giving i find that while wealthy parents do appear to make early bequests they rarely do so to the extent permitted by law and thus forego a substantial amount of tax savings

private monetary transfers in rural china are families altruistic monetary transfers between relatives may be motivated by altruism or they may represent payments for services rendered data from a large 1988 household survey are used to test these hypotheses and to study the size and direction of transfers in rural china the analysis suggests that altruism alone cannot explain the observed transfers and that exchange may be involved most of the money flows appear to be transfers from adult children to elderly parents and remittances from migrants child care is likely to be one of the main services that parents render to adult children in exchange for money

risk sharing within families evidence from the health and retirement study abstract we report strong empirical support for the presence of self interest based risk sharing within extended families in the u s a standard model of self interest based risk sharing predicts that the share of current family income consumed by a child positively depends on that child s permanent income it follows that parental transfers to children that are expected to earn more over the period of risk sharing arrangements should exhibit less sensitivity to the recipient s income fluctuations we test this distinguishing prediction of self interest based risk sharing by exploiting the variation of transfer receipts among siblings observed over 17 years of longitudinal data spanned by the health and retirement study

a new test of borrowing constraints for education we discuss a simple model in which parents and children make investments in the children s education investments for other purposes and parents can transfer cash to their children we show that for an identifiable set of parent child pairs parents will rationally under invest in their child s education for these parent child pairs additional financial aid will increase educational attainment the model highlights an important feature of higher education finance the expected family contribution efc that is based on income assets and other factors the efc is neither legally guaranteed nor universally offered our model identifies the set of families that are disproportionately likely to not provide their full efc using a common proxy for financial aid we show in data from the health and retirement study that financial aid increases the educational attainment of children whose families are disproportionately likely to under invest in education financial aid has no effect on the educational attainment of children in other families the theory and empirical evidence identifies a set of children who face quantitatively important borrowing constraints for higher education

private intergenerational contact in france and the demonstration effect this study analyses motives for intergenerational contact from adult children to their middle aged parents if these transfers may be explained either by altruism or by exchange we mainly focus on the demonstration effect where households take care of their own parents in order to elicit a future support from their children we test the model using a cross sectional survey from 1992 about private transfers in france according to the data the presence of children increases the amount of visits that respondents provide to their parents and the econometric results still hold after controlling for unobserved familial heterogeneity using fixed effects although this empirical evidence is consistent with the demonstration effect we suggest an alternative interpretation for the positive correlation based on the care of grandchildren

risk sharing within the extended family evidence from the indonesia family life survey abstractin recent years there has been an increase in the availability of longitudinal household surveys in developing countries that allow the researchers to construct linkages between households with familial ties this type of data allows researchers to look at whether some household outcomes are influenced by decisions made at the extended family level this article utilizes data from two waves of the indonesia family life survey 1997 and 2000 to construct a panel of extended families in order to focus on one particular example of such outcome whether consumption risk sharing occurs among households within the extended family the findings show that after controlling for the extended family fixed effects changes in the household s own income still matter for changes in its consumption rejecting full consumption risk insurance however the coefficients on household own income are small indicating significant degrees of risk sharing results from a set of reduced form estimations suggest that ho

motives for private income transfers private income transfers are becoming increasingly recognized as a key aspect of the u s economy the majority of private income transfers occur inter vivos i e between living persons but very little is known about this type of transfer behavior this paper tests alternative hypotheses concerning motivation for inter vivos transfers two motives are considered altruism and exchange evidence presented here casts doubt on the altruistic model of transfer behavior observed patterns for inter vivos transfers are more consistent with exchange related motives this finding has important implications for the effects of public transfer programs on the distribution of economic well being

the family inheritance and the intergenerational transmission of inequality unequal inheritance of material wealth is commonly considered a major cause of inequality in consumption however theoretical models of the intergenerational transmission of inequality by becker blinder and ishikawa imply that unequal inheritance may either increase or reduce consumption inequality differences in inherited wealth resulting from unequal parental incomes increase inequality in recipients consumption however unequal bequests caused by differences among families in the endowed ability of children or the costs of producing human capital are equalizing empirical results confirm these predictions the inheritance received by children is inversely related to both children s income and parental education thus bequests are compensatory in that ceteris paribus low income children inherit more than their advantaged contemporaries

how responsive are private transfers to income evidence from a laissez faire economy abstract in recent years there has been burgeoning interest in how private transfers respond to household income or transfer derivatives much of it is fueled by the specter of crowding out the more responsive are private transfers the more likely they could be supplanted by expansions in public transfers weakening or destroying the latter s distributive impact yet there is also an emerging consensus that actual transfer derivatives are trivial at least for the united states suggesting that crowding out might loom larger in the minds of some economists than in the data but perhaps crowding out is a fait accompli in the united states accordingly we focus on the philippines which has a much smaller public sector we also pursue a novel theoretical angle which generates a sharp non linear relationship between private transfer receipts and income in the form of a spline our empirical work applies recently developed estimation techniques that treat the spline s threshold as an unknown parameter and they uncover transfer derivatives much larger than conventional methods reveal notably private transfers patterns are consistent with altruistic preferences effective risk sharing or both in accord with theoretical predictions however strong transfer derivatives prevail only among low income households our findings suggest that attempts to aid the poor could be thwarted by private responses which leak benefits to richer households in the form of lighter burdens of support for less fortunate kin so the problems that operative private transfers create for public redistribution policy first pointed out by becker and barro over 25 years ago do indeed matter empirically

are family transfers crowded out by public transfers 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

parental altruism and inter vivos transfers theory and evidence this paper uses psid data on the extended family to test whether inter vivos transfers from parents to children are motivated by altruism specifically the paper tests whether an increase by one dollar in the income of parents actively making transfers to a child coupled with a one dollar reduction in that child s income results in the parents increasing their transfer to the child by one dollar this restriction on parental and child transfer income derivatives is derived for the standard altruism model augmented to include uncertainty and liquidity constraints these additional elements pin down the timing of inter vivos transfers the method used to estimate income transfer derivatives takes into account unobserved heterogeneity across families in the degree of altruism the findings strongly reject the altruism hypothesis redistributing one dollar from a recipient child to donor parents leads to less than a 13 cent increase in the parents transfer to the child far less than the one dollar increas

the effect of social entitlement programs on private transfers new evidence of crowding out working paper 2010 15 september 2010 abstract this paper exploits a natural policy experiment to directly identify the crowding out effects of public transfers on the incidence and level of private transfers the introduction of a large social security program in taiwan is used to estimate the effect of an exogenous increase in government transfer payments to the elderly on the private transfer behavior of their adult children using an instrumental variables strategy that accounts for the endogeneity of receiving public transfers the empirical results show strong evidence of crowding out on the extensive margin the probability of providing a positive transfer and weaker evidence of crowding out on the intensive margin the amount of the transfer conditional on it being positive jel classification h53 h55 h31 key words private transfers crowding out 1 introduction determining the impact of public transfer programs on private transfer behavior is a key issue from both a research and policy perspective if public transfers largely crowd out private transfers then the welfare impact of social redistributive programs will be smaller than perceived economic theory is ambiguous in its predictions about crowding out the altruism model developed in the seminal papers of barro 1974 and becker 1974 predicts essentially complete crowding out the model focuses on transfers from parents to children but can be applied equally well to transfers from adult children to their elderly parents in the model the child s utility is included in an altruistic parent s utility function which gives the parent an incentive to support the child the core of the altruism model is the prediction of redistribution neutrality which posits that the parents will adjust their transfer behavior in response to changes in the child s income for example an increase in the child s income due to welfare subsidies from the government will lower the amount of parental transfers if ricardian equivalence holds and the government subsidy is financed by a tax on the parents income then the parents will reduce their transfer exactly by the tax amount implying complete crowding out in contrast to the altruism model the exchange model of bernheim et al 1985 and cox 1987 argues that a child s services to the parents such as contacts and visits are at least in part financially motivated as the child expects monetary compensation in this model the amount of transfers could be a positive or negative function of the child s income as the child s income increases the opportunity cost of services increases and thus the amount of expected compensation for the services increases in such a setting the relationship between the child s income and the amount of parental transfers is not clear it could be positive if the parents demand for services is inelastic as they would need to increase transfer payments to the child in order to receive the same level of services if this were the case government subsidies would increase the amount of private transfers received and thus there would be no crowding effect on the other hand if the demand for services is highly elastic then parents demand would fall along with monetary compensation which would lead to crowding out 1 as a result of the ambiguous effect of crowding out predicted by theory a relatively large empirical literature has focused on the estimation of both the sign and magnitude of the crowding out effect of public transfer programs however due to data limitations most empirical studies have not been able to directly measure the crowding out effect of public redistribution programs most studies in this literature have attempted to indirectly measure the impact of such programs on beneficiaries by studying the response of private transfers to changes in the recipient s level of income the results from these papers however are not consistent

parent child bargaining parental transfers and the post secondary education decision schooling decisions are often modelled within a unitary preference framework in this article an alternative to the unitary preference model is proposed in which parents and child have conflicting preferences over parental transfers and the level of post secondary schooling and participate in cooperative bargaining as a means of resolving this conflict comparisons of the implications of the bargaining and unitary preference models motivate tests of parental altruism and income pooling to test these hypotheses reduced form transfer and schooling equations are estimated using data from the high school and beyond surveys the evidence suggests that the unitary preference model be rejected

incorporating biometric data in models of consumer choice the use of neuro physiological data in models of consumer choice is gaining popularity this article presents some of the benefits of using psycho physiological data in analyzing consumer valuation

intergenerational transfers and the accumulation of wealth h t ouseholds acquire wealth from two sources they save out of income they have earned and they receive transfers from other people the first method of wealth accumulation goes under the name of life cycle saving in which people save during their working lives and dissave after retirement the second involves either an inter vivos transfer that is a transfer between living people or a bequest a transfer that occurs at the death of the donor while inter vivos transfers and bequests will arise in dynastic models where preferences include a taste for the well being of one s descendents few empirical life cycle models reflect these concerns indeed a sharp debate has arisen over the ability of the simple life cycle model to explain observed wealth accumulation understanding the relative sizes of these sources of wealth accumulation affects a variety of issues for example the effects of government debt social insurance public transfer programs estate taxes and incentives for charitable giving depend to some extent on the magnitude and nature of private saving and transfers of wealth analyses of the inequality of wealth may depend on whether most of wealth is earned or received as transfers appropriate policies for encouraging private saving may look rather different depending on whether most saving is to be consumed later in life or passed along to the next generation finally evidence on transfer patterns relates to more fundamental

bequest motives a comparison of sweden and the united states this paper reviews four well known theoretical models of private bequest behavior notes their differing implications for public policy and discusses a way of empirically dis criminating among them then it implements the test with micro data from sweden lls and the u s psid the so called altruistic or dynastic model which among the four models has perhaps the most wide ranging implications for policy receives some support the sign pattern is as the model predicts while the magnitude is much smaller than the altruistic theory implies there is evidence of a potential complication due to a dependence of children s education on parents financial status in the case of the u s 2001 elsevier science b v all rights reserved

happiness and time preference the effect of positive affect in a random assignment experiment abstract we conduct a random assignment experiment to investigate whether positive affect impacts time preference where time preference denotes a preference for present over future utility our result indicates that compared to neutral affect mild positive affect significantly reduces time preference over money this result is robust to various specification checks and alternative interpretations of the result are considered our result has implications for the effect of happiness on time preference and the role of emotions in economic decision making in general finally we reconfirm the ubiquity of time preference and start to explore its determinants djel d12 d83 i31