Family Transfer Behavior in the HRS and AHEAD

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DESCRIPTION (provided by applicant): This study investigates whether an adult child substitutes financial transfers to an elderly parent for time transfers as the cost of his or her time increases. The specific aims of the project are: (1) to describe transfers of money and time by an adult child to elderly parents and to find how they vary with marital status and the number and sex of siblings, likelihood of a bequest; (2) to develop and estimate models of the effect of a child's opportunity cost of time on his or her propensity to transfer time or money to an elderly parent and on the amount transferred; (3) to calculate the compensated and uncompensated price elasticity of demand for time and financial transfers and to study how those vary by characteristics of parents and children. Understanding this behavior is important for several reasons. In the United States, population aging has generated concern for the welfare of a growing elderly population. If transfers from family members are economically important, measurement of the well being of the population should take into account these transfers. Moreover, an elderly parent may receive either financial or time transfers and the type may depend upon the characteristics of the recipient parent and the adult, donor child. Finally, private transfer motives have potential consequences for the effectiveness of government redistribution policies. We propose to accomplish the aims of the project by estimating the effect of a child's wage on transfers, exploiting the richness of the data from the Health and Retirement Study (HAS) and the Asset and Health Dynamics Among the Oldest Old (AHEAD). We methodically utilize both data and empirical techniques to control for biases resulting from omitted variables and unobserved heterogeneity. This research will provide important baseline estimates of the effect of a child's wage rate on financial and time transfers provided to elderly parents, and a foundation for future work on the elasticity of supply and demand for transfers with implications for tests of transfer motives.