Can we reconcile the predictions of the altruism model of the family with
the evidence on parental monetary transfers in the US? This paper provides
a new assessment of this question. I expand the altruism model by introducing
effort of the child and by relaxing the assumption of perfect information
of the parent about the labor market opportunities of the child. First,
I solve and simulate a model of altruism and labor supply under imperfect
information. Second, I use cross-sectional data to test ...
Can we reconcile the predictions of the altruism model of the family with
the evidence on parental monetary transfers in the US? This paper provides
a new assessment of this question. I expand the altruism model by introducing
effort of the child and by relaxing the assumption of perfect information
of the parent about the labor market opportunities of the child. First,
I solve and simulate a model of altruism and labor supply under imperfect
information. Second, I use cross-sectional data to test the following
prediction of the model: Are parental transfers especially responsive to
the income variations of children who are very attached to the labor
market? The results of the analysis suggest that imperfect information
accounts for many of the patterns of intergenerational transfers in the
US.
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