Intergenerational transfers: the ignored role of time

The literature on inter vivos and intergenerational transfers has largely focussed on the possible determinants of such transfers. Specifically, much of the empirical work has examined whether transfers are driven by altruistic relationship between “dynastic” households. However, the empirical literature has consistently overlooked the possibility that transfers may be driven by specific events in the recipients’ lives like marriage, childbirth and illness. Further, it has not addressed the possibility that within a reasonably long time frame – say, one year – transfers may influence household income as much as household income influences the probability and magnitude of transfers. This paper addresses these lacunae in the existing literature. Using GSOEP data from the 1996 and 1997 surveys, it shows that demographic and other events determine transfers to a significant extent, and also that overlooking the possible endogeneity of income may lead to bias in the econometric estimations. (AUTHOR)