Essays on intergenerational transfers
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Abstract
Intergenerational transfers are important in wealth accumulation and social-economic status transmission. This dissertation consists of three essays on intergenerational transfers.
Chapter 1 systematically reviews the role of intergenerational transfers in household finance using the Survey of Consumer Finances. In the short term, transfers can act as an “insurance” against income turbulence for members in a household. In the long term, inheritances are an important way of wealth transmission as inheritances can accumulate to 40% of current wealth for households who have ever received a transfer. But they have limited effects on wealth concentration at the top of the wealth distribution. Moreover, transfers received when young lead to larger net wealth and asset holdings.
Chapter 2 uses the Health and Retirement Survey to study the intergenerational transfer behavior and finds that parents are more likely to help children who are needier or maintain a closer relationship with them. Wealthier children are more likely to make positive financial transfers to their parents; some children pay implicit education loans back to their parents; but children do not use transfers as a way to win favor of potential inheritances. This chapter then examines a new channel that might to some degree explain the annuity puzzle: financial transfers from children can serve as a substitute for annuity income.
Chapter 3 constructs an overlapping generations model with two-sided altruism and provides a closed-form solution of a general equilibrium. The model suggests that operative bequests from parents to children and operative gifts from children to parents depend on relative resources and relative degrees of altruism between the parents and children. Ricardian equivalence holds only if the redistribution programs leave agents in the same operative transfer regime. It is then possible for the government to use a “pay-as-you-go” social security system to achieve optimal savings rate.