Family Transfers Involving Three Generations

Most models of family intergenerational transfers consider only two générations (parents and children) and focus on two motives for parental transfers : altruism and exchange, while assuming almost perfect susbtitution between inter vivos transfers and bequests. Based upon French evidence, this paper shows, on the contrary, that inter vivos downward transfers, made at quite distant date over the life cycle, belong to three distinct categories, according to the main objective pursued by parents : investment in child's education ; financial assistance ; wealth transmission (being susbtitutes for bequests only in the third case). Moreover, the domain of the analysis of familial behavior is expanded from two to three generations. French data do indeed show that, for each type of downward transfer, parents are strongly influenced by the behavior of their own parents ; moreover, for upward transfers, there is some, less robust, evidence of typical behaviors similar to Cox and Stark demonstration effect : parents help their own (old) parents, expecting to receive comparable support in old days from their children. Such behaviors can however be given different interpretations (that all blur the distinction between altruistic and exchange motives) : imitation ; transmission of family values or norms ; preference shaping of formation ; "indirect reciprocities", where the beneficiary of a transfer does not give back to the initial giver but to a third person of another generation.