Essays on Inter Vivos Transfers and Early Career Choices

TitleEssays on Inter Vivos Transfers and Early Career Choices
Publication TypeThesis
Year of Publication2020
AuthorsLoxton, A
UniversityIndiana University
CityBloomington, IN
Keywordschildren, Financial Support, Parents

My dissertation explores the linkage between parental financial support and child choices in the labor market. In the first chapter, I use data from the Health and Retirement Study from 1992-2014 to estimate differences in the frequency and magnitude of inter vivos transfers (financial gifts) to sons and daughters. Although there is no evidence of differences in amounts, parents give to daughters at higher rates. I explore potential mechanisms for this disparity and find that the difference in giving rates is partially explained by higher expected rates of future care from daughters. Even after controlling for differences in care-taking, income levels, and other characteristics, parents are still 10-20% more likely to give transfers to their daughters, especially while they are unmarried. In the second chapter, I find evidence that parents affect their child's career choice through inter vivos transfers. Children with wealthy parents favor jobs that have riskier income streams relative to their expected earnings because high-income parents can insure their children against large negative earnings shocks. Using the 1997 cohort from the National Longitudinal Study of Youth, I rank major fields of study according to two measures of earnings uncertainty. Using statistical methods, I show that children of higher income parents select into fields with higher earnings uncertainty. This effect is especially strong for men and first-generation college students. In the third chapter, I evaluate additional tradeoffs in the choice of college major. College majors carry both monetary (high expected earnings, job security) and nonmonetary (enjoyment, social change) benefits. Children with wealthier parents are much more likely to choose a major for nonpecuniary reasons. Additionally, gender is an important factor as women are significantly more likely to favor nonpecuniary benefits. The magnitude of the gender effect is approximately equivalent to an extra $100,000 in parent's income.

Citation Key11390