|Net versus Gross Measure of Monetary Transfers in Intergenerational Exchange Studies
|Year of Publication
|University of Kent
|Exchange, Monetary Transfers, Money
This paper investigates whether the choice of the net versus gross measure of monetary transfers from adult children to their elderly parents can explain the differences in the estimates of the wage effect on money transfers found in earlier studies. It carefully documents the transfer pattern and points to the limitations of the OLS specification in the analysis of either gross out-transfers from adult children to elderly parents or net transfers. A four-part model is offered as a better alternative for the analysis of intergenerational monetary exchange. This model consists of two Cragg's double hurdle models for out-transfers and in-transfers. The results from estimating this model uncover the following empirical regularities. First, wages of adult children play an important role in the determination of the transfers at the extensive margin: adult children with higher wages are more likely to give to their elderly parents and less likely to receive. Second, among those who participate in the exchange process wages have no effect on the amount of transfer given to parents, while having a positive effect on the amount of transfer received from parents. Finally, it has been found that certain characteristics have similar effect on both probability of being a a giver and a recipient. These features provide a useful guideline for future theoretical research. One of the possible theoretical models that possesses such features is outlined in this paper.