Upward-Flowing Intergenerational Transfers in Economic Development: The Role of Family Ties and their Cultural Transmission

I construct a model where upward-flowing income transfers, from adult children to their old parents, are driven by a culture of strong family ties. This evolves intergenerationally, through a process of cultural transmission. The two-way causal link between economic and cultural change can be a strong enough force to offset cultural substitution, thus generating path-dependent outcomes. These outcomes are consistent with empirical evidence showing that economic development is negatively related with upward-flowing intergenerational transfers, and with the strength of family ties. On the one hand, the economy may follow a convergence path towards a low level of economic development, where adherence to strong family ties is the dominant characteristic of a culturally homogeneous population, and where the overall flow of intergenerational transfers is substantial. On the other hand, the economy may follow a different path of convergence towards a relatively higher level of economic development, where the population is more diverse in terms of their attitudes on family ties, and where the overall flow of intergenerational transfers is lower by comparison.