Private transfers in comparative context
NTA workshop Berkeley, January 2006
F.C. Wolff
University of Nantes, France
Outline of the presentation
• Forms of private transfers
• Comparative results
• Important questions and implications
– What can we do from a comparative viewpoint?
Forms of private transfers
• (1) Financial transfers
• (2) Time transfers
• (3) Home-sharing
– (1) is given by interhousehold transfers
– (3) is picked up by intrahousehold transfers
– (2) no information actually in NTA
Forms of private transfers
(1) Financial transfers
• Pocket money
• Cash gifts: more regular transfers
• Donations, bequests: more infrequent data
• Intrahousehold transfers
• Charitable contributions
Forms of private transfers
(1) Financial transfers
• No clear data on pocket money
• Good information on regular cash gifts with a
consumption survey
• Bad information for bequests
• Good estimation a priori of intrahousehold allocation of
resources
• No clear information so far on charitable contributions:
also, who are the recipients of such transfers ?
Forms of private transfers
(2) Time transfers
• Time spent with children on school work
• Receipt of grandchild care for middle-aged
adults having children
• Time transfers made to the elderly because of
old age
• Volunteer work
Forms of private transfers
(2) Time transfers
•
Do such transfers matter ? Yes !
•
Because they have strong implication on the labor supply either of the donor
or the recipient (very important for age profiles on earnings)
•
Two cases:
– i) transfers to elderly parents: middle-aged adult may leave the labor market in
order to care for their parents
– ii) middle-aged adults may benefit from grandchild care to improve their labor
force participation
•
Consequence: we cannot study separately the provision of family transfers
and the labor force participation of individuals… because of strong
interrelationship a priori !
•
For instance, recent data on Share (10 european countries) show that
receiving grandchild care allows mother to have more likely a paid job !
Forms of private transfers
(Measurement issue)
• Important point : what to do with bequests when
using a consumption survey ?
• Someone who is about 60 certainly receive a bequest from
parents (say add 20 years for the donor)
• But someone who is 85 is more likely to receive a bequest
from spouse (so donor’s age should be similar to the age of
deceased spouse ?)
• Very ad hoc assumptions !!!! (spouse age + 30 if age<50,
spouse age + 25 if age>50 & age<60, spouse age + 20 if age
> 60 & age <70, etc)
• Need for assets and inheritances data sets !
Difficulty : no clear aggregate control
Comparative results
• Results on 7 countries
– Taiwan 1998, Costa Rica 2004, Thailand 1996
and 2004, Indonesia 1999, US 2000, South
Korea 2000, France 2001
– Normalized by mean of labor income (ages
30-49)
Comparative results
• Result 1.
Private transfers mainly flow to the young
generations, and to a lesser extent to the elderly
• Result 2.
No clear explanation concerning differences
between countries, see for instance Indonesia
and Thailand (similar pattern of old-age support
was expected ?)
Private transfers – All (mean)
0,04
0,03
0,02
0,01
0
0
-0,01
-0,02
-0,03
-0,04
10
20
30
40
50
60
70
80
90
Private transfers - Taiwan
0,04
0,03
0,02
0,01
0
0
-0,01
-0,02
-0,03
-0,04
10
20
30
40
50
60
70
80
90
Private transfers – Costa Rica
0,04
0,03
0,02
0,01
0
0
-0,01
-0,02
-0,03
-0,04
10
20
30
40
50
60
70
80
90
Private transfers - Thailand
0,04
0,03
0,02
0,01
0
0
-0,01
-0,02
-0,03
-0,04
10
20
30
40
50
60
70
80
90
Private transfers - Indonesia
0,04
0,03
0,02
0,01
0
0
-0,01
-0,02
-0,03
-0,04
10
20
30
40
50
60
70
80
90
Private transfers - US
0,04
0,03
0,02
0,01
0
0
-0,01
-0,02
-0,03
-0,04
10
20
30
40
50
60
70
80
90
Private transfers – South Korea
0,04
0,03
0,02
0,01
0
0
-0,01
-0,02
-0,03
-0,04
10
20
30
40
50
60
70
80
90
Private transfers - France
0,04
0,03
0,02
0,01
0
0
-0,01
-0,02
-0,03
-0,04
10
20
30
40
50
60
70
80
90
Evidence on bequests
0,005
0
0
10
20
30
40
50
60
70
80
90
France
Costa Rica
-0,005
-0,01
-0,015
-0,02
South Korea
Comparative results
• Result 3. Different profiles are observed
for interhousehold transfers between
developed and developing countries:
money mainly flows downwards in
developed countries
• Note: cross-country comparisons are
useful to detect bizarre results !
Interhousehold transfers – All (mean)
0,01
0,008
0,006
0,004
0,002
0
0
-0,002
-0,004
-0,006
-0,008
-0,01
10
20
30
40
50
60
70
80
90
Interhousehold transfers – Costa Rica
0,01
0,008
0,006
0,004
0,002
0
0
-0,002
-0,004
-0,006
-0,008
-0,01
10
20
30
40
50
60
70
80
90
Interhousehold transfers - Thailand
0,01
0,008
0,006
0,004
0,002
0
0
-0,002
-0,004
-0,006
-0,008
-0,01
10
20
30
40
50
60
70
80
90
Interhousehold transfers - Japan
0,01
0,008
0,006
0,004
0,002
0
0
-0,002
-0,004
-0,006
-0,008
-0,01
10
20
30
40
50
60
70
80
90
Interhousehold transfers - Indonesia
0,01
0,008
0,006
0,004
0,002
0
0
-0,002
-0,004
-0,006
-0,008
-0,01
10
20
30
40
50
60
70
80
90
Interhousehold transfers – South Korea
0,01
0,008
0,006
0,004
0,002
0
0
-0,002
-0,004
-0,006
-0,008
-0,01
10
20
30
40
50
60
70
80
90
Interhousehold transfers - France
0,01
0,008
0,006
0,004
0,002
0
0
-0,002
-0,004
-0,006
-0,008
-0,01
10
20
30
40
50
60
70
80
90
Interhousehold transfers: Thailand as an outlier ?
0,01
0,008
0,006
0,004
0,002
0
0
-0,002
-0,004
-0,006
-0,008
-0,01
10
20
30
40
50
60
70
80
90
Cash gifts versus bequests
• Result 4. Bequests are relatively more
important than inter vivos financial
transfers
• Result 5. In France, households first
receive inter vivos transfers, and then
receive bequests later in the life cycle
Cash gifts versus bequests - France
0,002
0,0015
Bequests
0,001
0,0005
0
0
-0,0005
-0,001
-0,0015
-0,002
10
20
30
40
50
Cash gift
60
70
80
90
Cash gifts versus bequests – South Korea
0,015
0,01
0,005
0
0
10
20
30
40
50
60
70
80
-0,005
Bequest
Cash gift
-0,01
-0,015
90
Cash gifts versus bequests – Costa Rica
0,004
0,002
Bequest
0
0
-0,002
-0,004
-0,006
-0,008
-0,01
10
20
30
40
50
Cash gift
60
70
80
90
Intra versus interhousehold transfers
• Result 6. Intrahousehold transfers are much
more important than interhousehold transfers
• Corollary. Tests of family transfer motives are
certainly biased as they only consider either
cash gifts or bequests ! (and in fact results are
slightly difference once co-residence is taken
into account in the analysis)
Intra versus interhousehold transfers – All (mean)
0,05
0,04
Intra
0,03
0,02
0,01
Inter
0
0
-0,01
-0,02
-0,03
-0,04
-0,05
10
20
30
40
50
60
70
80
90
Intra versus interhousehold transfers –
Costa Rica
0,05
0,04
Intra
0,03
0,02
0,01
Inter
0
0
-0,01
-0,02
-0,03
-0,04
-0,05
10
20
30
40
50
60
70
80
90
Intra versus interhousehold transfers –
Thailand
0,05
0,04
Intra
0,03
0,02
0,01
Inter
0
0
-0,01
-0,02
-0,03
-0,04
-0,05
10
20
30
40
50
60
70
80
90
Intra versus interhousehold transfers Japan
0,05
0,04
Intra
0,03
0,02
0,01
Inter
0
0
-0,01
-0,02
-0,03
-0,04
-0,05
10
20
30
40
50
60
70
80
90
Intra versus interhousehold transfers Indonesia
0,05
0,04
Intra
0,03
0,02
0,01
Inter
0
0
-0,01
-0,02
-0,03
-0,04
-0,05
10
20
30
40
50
60
70
80
90
Intra versus interhousehold transfers –
South Korea
0,05
0,04
Intra
0,03
0,02
0,01
Inter
0
0
-0,01
-0,02
-0,03
-0,04
-0,05
10
20
30
40
50
60
70
80
90
Intra versus interhousehold transfers France
0,05
0,04
Intra
0,03
0,02
0,01
Inter
0
0
-0,01
-0,02
-0,03
-0,04
-0,05
10
20
30
40
50
60
70
80
90
Important questions
• Question 1.
Do we overstate the magnitude of intrahousehold
transfers ?
=> this could occur because we have imperfect
information on home ownership and lack of appropriate
data to understand the dynamics of home-sharing
arrangements for instance: when an adult child lives with
a parent, who owns the dwelling?
=> we also do not account for domestic production and
positive externalities within the family (grandparents
providing grandchild care services…)
Important questions
• Question 1 (…)
=> also, we have to be careful about the meaning of
these intrahousehold transfers… in the sense that
they include both intergenerational transfers and
intragenerational transfers:
• Transfers to children and parents
• Transfers between spouses
=> problems of aggregate control for family
transfers (inter or intra)
Important questions
•
Question 2.
Can we say anything about the motives for private
transfers ?
–
Very briefly, two main motives : altruism or exchange
–
Survey in Laferrère A., Wolff F.C., (2006), ‘Microeconomic
models of family transfers’, in S.C. Kolm, J. Mercier Ythier
(eds), Handbook on the Economics of Giving, Reciprocity and
Altruism, North-Holland, Elsevier.
–
Main conclusion of the survey: most of the tests using
microdata are not really conclusive … strong predictions of the
altruistic model are always rejected (but if we do not account
for all the transfers … what can we say ? … recall the
importance of neglected intrahousehold transfers)
Important questions
• Question 2 (…)
– We have to be very careful with an interpretation in
terms of altruism or exchange with the data !
– To properly account for the exchange model, we need
data over several years : does a given cohort repay
its debt to the parents ?
– But again be cautious : middle-aged adults may repay
their debt in the form of time transfers (this would be
the core of a services-money exchange ! … and large
transfers certainly don’t mean large altruism
Important questions
• Question 2 (…)
– As NTA draw on consumption surveys, one can use more
rigorous tests for the altruistic model, for instance by estimating
engel curves both with nuclear and extended families.
– The distribution of resources between generations (for a given
family) should not matter under altruism : this is the well-known
income pooling property
– Other and more recent ideas on measuring altruism through the
use of subjective measures on well-being (just estimate say the
well-being of a parent as a function of parental characteristics
plus child’s well being … in France, around 0.1 / 0.15)
Important questions
• Question 3.
What about the interplay between private and public transfers ?
– Imagine that we observe over time a rise in public support to the elderly
and a decline in the provision of upstream transfers
– Does it mean that public support crowds out private transfers ?
– Perhaps no ! There may be simply some changes in the form of family
old-age support, i.e. with a substitution between time transfers and
financial transfers
• middle-aged adults would now give more time and less money to their
parents).
• Young retired parents may care for grandchildren instead of giving money
– So again, it is very important to account for all the different types of
transfers
Important questions
• Question 4.
How can we interpret the results ?
– We are interested in understanding the effects of aging.
– We get cross-sectional estimates for labor income and private transfers
age profile (a snapshot)
– But as elderly people are growing older, this should have consequences
on the labor market participation of middle-aged adults
• Women may leave the labor market to care for parents
• Or women may increase their labor participation to get more money and pay
for formal care
– We are currently doing as if labor participation and family transfers
provisions are independent … but in fact there is a strong
interrelationship between labor decisions and private transfers.
Conclusion
•
Very useful analysis from a comparative perspective …
•
… because we can get some quite general conclusions
•
However, more detailed micro data are undoubtedly needed to better
understand issues like :
• Do people behave in an altruistic way ?
• Measurement of the crowding out effect
• The interrelationship between the provision of family transfers (either given or received)
and the labor decisions of family members
•
And please recall that forms of transfer are changing over time and with the
demography: growing importance of grandchild care transfers since there
are many more families with three and sometimes four generations (for
instance, more than 40% in Europe with a sample of 10 countries)