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Is It True Love? Altruism Versus Exchange in Time and Money Transfers

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Abstract

This paper investigates what motivates intergenerational inter-vivos time and money transfers. We consider a model in which transfers may be driven not only by altruism, but also by exchange considerations. We use data from the Survey of Health, Ageing and Retirement in Europe to discriminate between the two motives. We show that both if we consider money transfers from parents to children and time transfers from children to parents, the empirical evidence rejects pure altruism in favor of exchange. This result has important policy implications on the effectiveness of formal care provision as a substitute for informal care and on the impact of taxation on transfers.

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Notes

  1. McGarry (2000) considers a dynamic setting where parents are not fully informed about their child’s future income. Villanueva (2001) not only allows for imperfect information but also for endogenous child’s effort. His model also explains the violation of the neutrality hypothesis.

  2. In order to derive these predictions, we have to make some separability assumptions on the utility functions of the child and of the parent. However, Cox (1987) makes similar assumptions to establish the negative relationship between child’s income and the amount of care provided by her to the parent.

  3. We only found papers by Schoeni (1997) and Altonji et al. (2000) who use tobit models to estimate the relation between care and inter-vivos transfers on the one hand and donor and recipient income on the other. These authors reject the exchange motive for transfers. As we will argue below, one should not use tobit models to analyze decisions on inter-vivos transfers and care provision. Arrondel and Masson (2001) model different types of transfers, both in money and in kind, within the same framework. They then provide evidence on both but with data from different datasets depending on the type of transfer.

  4. In the young sample, child’s income is not observed. We proxy this variable by years of education of the child.

  5. Subscripts \(s, v\) and \(c\) represent partial derivatives with respect to services, child’s utility and consumption respectively.

  6. The case of corner solutions is discussed by Alessie et al. (2011) and Cox (1987).

  7. We do not use data from the second wave because they do not contain information on the socio-occupational status of the respondents’ parents, which is a key variable in our analysis.

  8. SHARE provides a third measure of services, namely help with personal care, e.g. dressing, bathing or showering, eating, getting in or out of bed, using the toilet. We have tried to use also this third measure but the reduced sample size of those who provide or received help with personal care does not allow obtaining reliable estimates.

  9. The different timing in service and financial transfer, together with the limited number of households for which responds report information on both their parents and their children, prevent us from estimating a three generation family constitution model \(\grave{a}\) laCigno (2006).

    Fig. 1
    figure 1

    Transfer and service decision: descriptive evidence

    Full size image

  10. Notice that while the percentage of children who receive a transfer from their parents is 15.2 %, in our sample only 2.1 % of parents receive any financial help from their children. Arrondel and Masson (2001) found a similar figure (2.7 %) for financial transfers from children to parents in France. Although this is not a formal test of assumption \(T\ge 0\) in (3c), it suggests that the theoretical model in this respect is not at odds with the empirical evidence.

    Table 1 Financial transfers from Respondents to each child
    Full size table

  11. The numbers reported in Tables 1 and 2 are slightly different from those presented in Fig. 1 since they refer to the estimation sample rather than to the full dataset.

  12. Gender, age and distance from respondent’s house are reported for each child, whereas time and type of care provided to the parents, marital status and number of kids is only asked for up to four children. When there are more than four children, the program sorts them in ascending order by minor, proximity and birth year, where minor is defined as 0 for all children aged 18 and over and 1 for all others, and then selects the first four. Still, the selection introduced by the survey scheme is limited: all the relevant information for our analysis is collected on the 94.78 % of the children.

  13. We have estimated the same models by restricting the sample only to children aged 25 or over to make sure to exclude transfers for further education but the results, are virtually unaffected reported.

  14. ISCO codes refer to the International Standard Classification of Occupation provided by the International Labour Organization (ILO).

    Table 6 Respondents as children: service equation
    Full size table

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Authors and Affiliations

  1. Faculty of Economics and Business, University of Groningen, Nettelbosje 2, 9747AE , Groningen, The Netherlands

    Rob Alessie & Viola Angelini

  2. Economics Department, Ca’ Foscari University of Venice, Cannaregio 873, 30121 , Venezia, Italy

    Giacomo Pasini

  3. Netspar, Network for Studies on Pensions, Ageing and Retirement, Tilburg, The Netherlands

    Rob Alessie, Viola Angelini & Giacomo Pasini

Authors
  1. Rob Alessie
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  2. Viola Angelini
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  3. Giacomo Pasini
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Correspondence to Rob Alessie.

Additional information

We are grateful to an anonymous referee, Michael Hurd, Anne Laferrère, Flavia Coda Moscarola, Jan Van Ours, Paolo Pin, Lukas Schwank and Peter van Santen for useful comments. We also thank participants to the WISE seminar (Venice), the BOMOPA conference (Padua), the Netspar Pension Workshop (Zurich), the RAND Workshop on Comparative International Research (Santa Monica), the Spring Meeting of Young Economists (Groningen), the Royal Economic Society (London), the Becker Conference on the Economics of the Family (Paris), the ASSET conference (Evora) and the 2nd International Workshop on the Socio-Economics of Ageing (Lisbon) for helpful suggestions. This paper uses data from SHARE release 2.5.0, as of May 25th 2011. SHARE data collection in 2004–2007 was primarily funded by the European Commission through its 5th and 6th framework programmes (Project Numbers QLK6-CT-2001-00360; RII-CT-2006-062193; CIT5-CT-2005-028857). Additional funding by the US National Institute on Aging (Grant Numbers U01 AG09740-13S2; P01 AG005842; P01 AG08291; P30 AG12815; Y1-AG-4553-01; OGHA 04-064; R21 AG025169) as well as by various national sources is gratefully acknowledged (see http://www.share-project.org for a full list of funding institutions).

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Alessie, R., Angelini, V. & Pasini, G. Is It True Love? Altruism Versus Exchange in Time and Money Transfers. De Economist 162, 193–213 (2014). https://doi.org/10.1007/s10645-013-9221-5

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