A semiparametric alternative to the Heckman correction: application with left-censored data on parental transfers

Using a semiparametric estimator developed by Klein and Vella (J Appl Econom 24(5):735–762, 2009b), we study the motives for parental wealth transfers to living children using left-censored data from the Health and Retirement Study. We confirm the presence of heteroskedastic errors in our data and show that the inverse Mills ratio approach employed by the Heckman correction would be biased in such a setting. Using the more flexible semiparametic approach, we find evidence of a nonlinear relationship between amount of inter vivo transfers and recipient children’s household incomes, suggesting that parents’ motives for transferring wealth may vary depending on their child’s income level. © 2023, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.