Intergenerational Altruism and Transfers of Time and Money: A Lifecycle Perspective

Abstract: Parental investments in children can take one of three broad forms: (1) Time investments during childhood and adolescence that aid child development (2) Educational investments (3) Cash transfers in the form of inter-vivos gifts and bequests. Using panel data that covers a cohort of individuals from birth to retirement, we develop a dynastic model of household decision-making with intergenerational altruism that nests a multi-period child production function, incorporates all three of these types of investments, and allows us to quantify the relative importance of those investments in explaining intergenerational persistence in outcomes. Preliminary estimates highlight the role of complementarities in the production of ability between investments at different childhood stages and between ability and education in the production of adult earnings in propagating inequality across generations.

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* joint with Uta Bolt, Eric French and Jamie Hentall Maccuish