Paper #650

Title:

Parental altruism under imperfect information: Theory and evidence

Author:

Ernesto Villanueva

Date:

September 2002

Abstract:

Can we reconcile the predictions of the altruism model of the family with the evidence on intervivos transfers in the US? This paper expands the altruism model by introducing e ?ort of the child and by relaxing the assumption of perfect information of the parent about the labor market opportunities of the child. First, I solve and simulate a model of altruism under imperfect information. Second, I use cross-sectional data to test a prediction of the model: Are parental transfers especially responsive to the income variations of children who are very attached to the labor market? The results suggest that imperfect information accounts for several patterns of intergenerational transfers in the US.

Keywords:

Altruism, imperfect information, intervivos transfers

JEL codes:

D19, D64, D82, J14, H20

Area of Research:

Labour, Public, Development and Health Economics

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