Intergenerational Transfers, Borrowing Constraints and Household Size

We examine the relationship between private transfers and household size in the presence of capital market imperfections by incorporating a two-sided dynastic utility specification into an overlapping generations life-cycle model with inter-vivos transfers. 0ur results show that the transfers young liquidity constrained individuals receive are negatively related to their contemporaneous earnings, positively related to their future earnings, and negatively related to the fertility rate under certain conditions. We find that transfers to the old are ambiguous in the fertility rate and that middle-aged savings for old age are positively related to household size if the elasticity of the "altruism multiplier" with respect to the fertility rate is greater than unity, but are negatively related if it is less than unity.

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Working or Discussion Paper
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JEL Codes:
D11; J13
Series Statement:
Working Paper

 Record created 2017-04-01, last modified 2018-01-23

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