Intergenerational Transfers in the Families of Older Adults

This dissertation uses a Nash bargaining model and data on elderly parents and their adult children to explore the intergenerational transfer decisions in extended families of elderly parents. A distinguishing feature of this study is that the parent and the children are both decision makers. The analysis focuses on the joint decisions of child to parent time transfers, parent to child money transfers, and the living arrangement of the elderly parent. Estimation is performed using a sample of 499 families of unmarried elderly parents who have one adult child from the Assets and Health Dynamics of the Oldest Old Survey. Multivariate probit models are estimated to examine the determinants of the aforementioned decisions. The multivariate estimates allow the determination of the extent to which previously estimated single-equation models suffered from failure to recognize the interdependent nature of these decisions. Results from the single equation probit models and the multivariate probit models are similar. The multivariate estimates reveal no significant between equation correlations. We can therefore be more confident of the results from the single equation estimations in the literature and their implications. The results from this analysis confirm the findings of earlier literature. Parental health and income influence family transfer behaviors. In addition to confirming many previous results, the empirical evidence presented shows that relative economic situations between elderly parents and their adult children are important determinants of intergenerational transfers, particularly for the elderly parents' living arrangement decision. For example, intergenerational coresidence represents a transfer between an elderly parent and the adult child. However it may not necessarily be a response to the increasing care needs of the aging parents: Joint living is not only more likely for low income elderly parents whose children are financially better off than the parents, but also for high income elderly parents whose children are financially worse off than the parents.

Family Relations

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