inter vivos transfers and exchange most parents divide their bequests equally among their children whereas inter vivos transfers are usually unequal we propose that exchange is better for inducing inter vivos transfers than bequests inter vivos transfers can be adjusted quickly to the amount of care are less costly than writing a will and can be kept secret from other family members and the public the results from national longitudinal data show that as expected if a parent gives any inter vivos transfers she is more likely to give to children who provide informal care informal care has no effect on the equality of intended bequests

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

intergenerational transfers and liquidity constraints a growing body of evidence indicates that liquidity constraints could affect a substantial proportion of u s consumers but little is known about why these constraints might exist an important but little explored issue is the relationship between inter vivos intergenerational transfers and liquidity constraints these transfers can ease borrowing constraints empirical transfer patterns match those predicted from a model in which transfers are allocated to liquidity constrained consumers in particular the distinction between current and permanent incomes of potential recipients is a key aspect of private transfer behavior the findings have important implications for our understanding of consumer behavior

the strategic bequest motive although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation our understanding of bequest motives remains incomplete we develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries actions the model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfers we present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries

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

informal insurance arrangements with limited commitment theory and evidence from village economies recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income thus rejecting the hypothesis of full risk pooling we attempt to explain these observations by adding limited commitment as an impediment to risk pooling we provide a general dynamic model and completely characterise efficient informal insurance arrangements constrained by limited commitment and test the model using data from three indian villages we find that the model can fully explain the dynamic response of consumption to income but that it fails to explain the distribution of consumption across households

risk and insurance in a rural credit market an empirical investigation in northern nigeria credit contracts play a direct role in pooling risk between households in northern nigeria repayments owed by borrowers depend on realizations of random shocks by both borrowers and lenders the paper develops two models of state contingent loans the first is a competitive equilibrium in perfectly enforceable contracts the second permits imperfect information and equilibrium default estimates of both models indicate that quantitatively important state contingent payments are embedded in these loan transactions but that a fully efficient risk pooling equilibrium is not achieved the research is based on a year long survey in zaria nigeria conducted by the author

wealth inequality and intergenerational links previous work has had difficulty generating household saving behaviour that makes the distribution of wealth much more concentrated than that of labour earnings and that makes the richest households hold onto large amounts of wealth even during very old age i construct a quantitative general equilibrium overlapping generations model in which parents and children are linked by accidental and voluntary bequests and by earnings ability i show that voluntary bequests can explain the emergence of large estates while accidental bequests alone cannot and that adding earnings persistence within families increases wealth concentration even more i also show that the introduction of a bequest motive generates lifetime savings profiles more consistent with the data

the family as an incomplete annuities market families can self insure against uncertain dates of death through implicit or explicit agreements with respect to consumption and interfamily transfers interfamily transfers need have nothing to do with altruistic feelings they may simply reflect risk sharing behavior of completely selfish family members although family annuity markets are incomplete even small families can substitute by more than 70 percent for perfect market annuities given adverse selection and transaction costs family risk pooling may be preferred to public market annuities in the absence of public annuities these risk sharing arrangements provide powerful incentives for marriage and family formation

a reexamination of the strategic bequest motive this paper investigates the strength of the empirical evidence of the strategic bequest hypothesis proposed by bernheim shleifer and summers 1985 at issue is whether bequests are primarily motivated by a desire to influnce the behavior of potential beneficiaries alternatively bequests may be motivated by altruism or risk aversion in the presence of incomplete annuity and health insurnace markets e g tomes 1981 hurd 1989

distributional implications of climate change in rural india a general equilibrium approach we develop a general equilibrium framework based on a specific factors trade model to quantify the medium term household welfare impacts of global warming in rural india using an hedonic approach grounded in the theory combined with detailed microdata we estimate that three decades of warming will reduce agricultural productivity in the range of 7 13 with the arid northwest of india especially hard hit our analysis shows that the proportional welfare cost of climate change is likely to be both modest and evenly distributed across percentiles of the per capita income distribution but this latter conclusion emerges only when the flexibility of rural wages is taken into account

household consumption smoothing through ethnic ties evidence from cote d ivoire abstract this paper investigates the hypothesis that households in cote d ivoire take part in spatially diversified risk sharing arrangements with members of their own ethnic group empirical tests are presented using several estimation methods to deal with heteroscedasticity measurement error and extreme value problems to examine whether results are robust across estimation procedures the hypothesis of complete risk sharing within ethnic groups is rejected however there appears to be some partial insurance performed by individual households with other members of the same ethnic group particularly for the households residing in the regions least likely to have access to formal financial arrangements

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

moving back home insurance against labor market risk this paper demonstrates that the option to move in and out of the parental home is a valuable insurance channel against labor market risk which facilitates the pursuit of jobs with the potential for high earnings growth using monthly panel data i document an empirical relationship among coresidence individual labor market events and subsequent earnings growth i estimate the parameters of a dynamic game between youths and parents to show that the option to live at home can account for features of aggregate data for low skilled young workers small consumption responses to shocks high labor elasticities and low savings rates

the saving of the elderly in micro and macro data examination of household micro data on the elderly has generally concluded that they do not dissave significantly whereas estimates using aggregate macro data have shown that the presence of a large elderly population leads to a lower saving rate this paper shows that if interactions between generations are important one would not expect these estimates to be the same the paper presents new evidence that bequests are plausibly the source of this discrepancy examination of data from young households that have received or expect bequests confirms that bequests are indeed an important factor determining the saving of the young

risk sharing between and within families this paper uses the panel study of income dynamics to test whether risk sharing is complete between or within american families the tests accommodate a wide variety in the configuration and availability of family data the test results reject inter as well as intra family full risk sharing even assuming that leisure is endogenous or that leisure and consumption are nonseparable

motives for private transfers over the life cycle an analytical framework and evidence for peru abstract this paper tests for the motives for private income transfers we consider two motives altruism and exchange the question of private transfer motives is important because such motivation can influence the effects of public income transfers on the distribution of income using a household survey for peru we find that transfer amounts received increase with recipient pre transfer income which contradicts a key prediction of the strong form of the altruism hypothesis but is consistent with exchange we also find that capital market imperfections are likely to be an important cause of private transfers and that social security benefits crowd out the incidence of private transfers

bequests as signals an explanation for the equal division puzzle in the united states more than two thirds of decedents with multichild families divide their estates exactly equally among their children in contrast gifts given before death are usually unequal these findings challenge the validity of existing theories regarding the determination of intergenerational transfers in this paper we develop a theory that accounts for this puzzle based on the notion that the division of bequests provides a signal about a parent s altruistic preferences the theory can also explain the norm of unigeniture which prevails in other societies

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

full insurance in the presence of aggregate uncertainty this paper tests implications of full consumption insurance the object is to determine how much mileage can be obtained from a model with complete markets with such features as private information or liquidity constraints omitted the implication exploited is that individual consumption responds to aggregate risk but not to idiosyncratic risk the test involves regressing the change in household consumption onto the change in aggregate consumption and other right hand side variables such as the change in household income and change in employment status all variables other than the change in aggregate consumption are predicted to be insignificant in explaining the change in household consumption with observations on consumption and income for 10 695 households from the consumer expenditure survey the results are mixed the results for one specification exponential utility are mostly consistent with full consumption insurance the results for the other specification power utility are not

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

a simple test of consumption insurance are consumers effectively insured against idiosyncratic shocks to income or wealth either by formal institutions such as charities private insurance and government programs or by informal mechanisms such as gifts and loans from relatives friends and neighbors under full insurance consumption growth should be cross sectionally independent of idiosyncratic variables that are exogenous to consumers this proposition is tested by cross sectional regressions of consumption growth on a variety of exogenous variables full insurance is rejected for long illness and involuntary job loss but not for spells of unemployment loss of work due to strike and an involuntary move

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

coalitions in transboundary pollution reduction during emission reductions countries render services to each other by reducing transboundary pollution which should be recognized as an additional source of benefit since transboundary pollution fluxes are often significant the underestimation of this factor can substantially affect the choice of emission reduction strategies and eventually restrain pollution reduction this factor is a specific feature of the transboundary pollution problem that in the taxonomy of m iler 1990 relates to the case of regional reciprocal externalities cooperation in the case of regional reciprocal externalities has been often studied explicitly or implicitly in terms of cooperative games with transferable utilities tu one reason for this is that within this approach side payments are allowed which theoretically give higher gains to participants as compared to the approach with non transferable utilities ntu another reason is that the theory of ntu games is not yet sufficiently developed as compared with the theory of tu games but the standard tu approach to regional environmental regulation shows significant drawbacks discussing the analyses of the canadian american agreement on the columbia river by krutilla 1966 1968 and of the mexican american agreement on the colorado river by kneese 1988 m iler 1990 points out that the countries do not use side payments in the explicit form moreover the amounts of implicit side payments seem to be in contradiction with the criteria of economic benefits producing an impression of irrationality of the countries choices mner 1990 in this paper the tu approach is abandoned in favour of the ntu approach to treat the case of regional reciprocal externalities from the viewpoint of the ntu game an irrational behaviour of a participant occurs when his preferences involve hidden goals while his implicit side payments favourably affect the other participants expected choices of strategies with respect to these hidden goals the ntu approach becomes immune to irrational behaviour if it allows consideration of the participants utilities reflecting their respective hidden goals through the above mechanism of transposed preferences non transferability of utilities generally means incommensurability of

debt constrained asset markets we develop a theory of general equilibrium with endogenous debt limits in the form of individual rationality constraints similar to those in the dynamic consistency literature if an agent defaults on a contract he can be excluded from future contingent claims markets trading and can have his assets seized he cannot be excluded from spot markets trading however and he has some private endowments that cannot be seized all information is publicly held and common knowledge and there is a complete set of contingent claims markets since there is complete information an agent cannot enter into a contract in which he would have an incentive to default in some state in general there is only partial insurance variations in consumption may be imperfectly correlated across agents interest rates may be lower than they would be without constraints and equilibria may be pareto ranked

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

imperfect commitment altruism and the family evidence from transfer behavior in low income rural areas in this paper we examine empirically whether risk pooling is more advantageous among altruistic compared to selfish agents in a framework where individuals cannot make binding commitments in particular we incorporate altuism into a model of risk sharing under imperfect commitment and use simulation methods to establish tests of the roles of both altruism and commitment problems in determining the extent of insurance and the intertemporal movements in interhousehold transfers the tests are carried out using three panel data sets from two countries of rural south asia that provide detailed information on transfers and enable the measurement of income shocks the estimates provide strong support for the notion that imperfect commitment substantially constrains informal transfer arrangements whether kin based or not but also provide evidence that altruism plays an important role in ameliorating commitment constraints and thus in increasing the gains from income pooling