recipients,whites receive $3,500 more than Mexican-Americans,and Mexican- Americans receive $700 more than blacks. Most studies have found that monetary transfers flow primarily from the old to the young (Cox and Raines,1985;MacDonald,1990;Gale and Scholz,1991). Cox and Raines(1985)find that monetary transfers given to younger generations account for 64 percent of the total dollar amount of transfers.And Gale and Scholz (1991)also find that the probability of giving money increases with age, peaking at ages 55-64.The probability of receiving peaks at ages 35-44,with the elderly very unlikely to receive money transfers. Several studies restrict analyses to transfers from parents to children.Mac- Donald(1990)reports that the individual from whom the respondent most com- monly receives transfers is a parent.Similarly,using the Survey of Consumer Finances,Gale and Scholz (1991)estimate that monetary transfers received from parents account for 84 percent of the total amount of transfer dollars received. Most of the theories of private transfers posit that the characteristics of both the potential donor and potential recipient are important,and some studies have examined the effects of parental characteristics since most transfers are between parents and their children.Cox and Rank (1992)find that parent's income posi- tively influences the amount of money received by adult children even when con- trolling for the adult child's income.Similarly,Rosenzweig and Wolpin (1990) find that a rise in parental income by $5,000 increases the probability that the adult child will receive a monetary transfer while living outside the home by 2.2 percent and decreases the probability of co-residence by 2.5 percent.Using the 1988 PSID,Altonji et al.(1996)also find that parent's income positively influences the amount of money received by adult children. These studies have begun to provide some information on private transfers, but there are still many unresolved issues.The various surveys report a wide range of estimates of the share of households receiving financial transfers,from about 8 to 20 percent.The extent to which households are connected through any type of private transfer,whether it be cash assistance or time help,and whether it be through giving or receiving assistance,is not known,yet is important for evaluat- ing the implications of various models (Bernheim and Bagwell,1988).The age pattern of transfers is also important as the age structure of the population contin- ues to change.One of the focal relationships is the effect of income on the amount of transfers received,and the evidence is still mixed.Our analyses of the 1988 PSID will help address some of these issues. III.THE DATA:1988 PANEL STUDY OF INCOME DYNAMICS The data that receive primary attention come from a supplement to the 1988 PSID that investigates private interhousehold transfers.The question regarding private parental monetary transfers asks,"During 1987,did (you or your family living there)receive any loans,gifts,or support worth $100 or more from your Throughout the paper the term"household"will refer to the nuclear family which consists of the PSID respondent and his/her family living there. 428
recipients, whites receive $3,500 more than Mexican-Americans, and MexicanAmericans receive $700 more than blacks. Most studies have found that monetary transfers flow primarily from the old to the young (Cox and Raines, 1985; MacDonald, 1990; Gale and Scholz, 1991). Cox and Raines (1985) find that monetary transfers given to younger generations account for 64 percent of the total dollar amount of transfers. And Gale and Scholz (1991) also find that the probability of giving money increases with age, peaking at ages 55 -64. The probability of receiving peaks at ages 35-44, with the elderly very unlikely to receive money transfers. Several studies restrict analyses to transfers from parents to children. MacDonald (1990) reports that the individual from whom the respondent most commonly receives transfers is a parent. Similarly, using the Survey of Consumer Finances, Gale and Scholz (1 991) estimate that monetary transfers received from parents account for 84 percent of the total amount of transfer dollars received. Most of the theories of private transfers posit that the characteristics of both the potential donor and potential recipient are important, and some studies have examined the effects of parental characteristics since most transfers are between parents and their children. Cox and Rank (1992) find that parent's income positively influences the amount of money received by adult children even when controlling for the adult child's income. Similarly, Rosenzweig and Wolpin (1990) find that a rise in parental income by $5,000 increases the probability that the adult child will receive a monetary transfer while living outside the home by 2.2 percent and decreases the probability of co-residence by 2.5 percent. Using the 1988 PSID, Altonji eta/. (1996) also find that parent's income positively influences the amount of money received by adult children. These studies have begun to provide some information on private transfers, but there are still many unresolved issues. The various surveys report a wide range of estimates of the share of households receiving financial transfers, from about 8 to 20 percent. The extent to which households are connected through any type of private transfer, whether it be cash assistance or time help, and whether it be through giving or receiving assistance, is not known, yet is important for evaluating the implications of various models (Bernheim and Bagwell, 1988). The age pattern of transfers is also important as the age structure of the population continues to change. One of the focal relationships is the effect of income on the amount of transfers received, and the evidence is still mixed. Our analyses of the 1988 PSID will help address some of these issues. The data that receive primary attention come from a supplement to the 1988 PSID that investigates private interhousehold transfer^.^ The question regarding private parental monetary transfers asks, "During 1987, did (you or your family living there) receive any loans, gifts, or support worth $100 or more from your '~hrou~hout the paper the term "household" will refer to the nuclear family which consists of the PSID respondent and his/her family living there
parents?These transfers do not include court ordered assistance such as child support or alimony.Furthermore,the PSID asks about transfers with each of the respondent's parents and parents-in-law.With regard to time help,the question asked is:"About how many hours in 1987 did they [your parents]spend helping (you/your family living there )?"Respondents are also asked to report the amount of transfers given to parents in both time and money.Finally,transfers of money and time with other relatives and with friends are each reported. In addition to the information on private transfers,the households are asked to provide information regarding each of the head's parents and,if there is a spouse,each of the spouse's parents.This information includes the parents'net wealth,education,distance in miles from respondent's residence,and marital status. Combined with the information collected annually,the PSID data on private transfers have several advantages over data available from most other surveys: Demographic and income characteristics of both the donor and the recipi- ent are available for parental transfers.Furthermore,the information regarding the parent is more extensive than in other surveys. Data on transfers of money and time assistance,both given and received, are collected. Data on both where a transfer was made and the magnitude of the transfer are collected. In households where there is a spouse,transfers are recorded to and from the spouse's parents.Furthermore,characteristics of the spouse's parents are ascertained. The PSID has an extensive set of socioeconomic information on the house- hold being interviewed and the individuals within the household. Since it is a panel study,the PSID has information for more than one year,although the reliable data on private transfers are only available in 1988.12 Two sample selections were made for the analyses below.First,households in which the head changed between 1987 and 1988 were eliminated,which con- sisted of 492 cases;this is done to insure that private transfers that were made in 1987 and reported in 1988 are attributed to the correct household head.Second, if the head of the household and the head's parents or parents-in-law live in the same household,the observation is dropped.This reduces the sample size by 420,leaving 6,202 households.The question regarding transfers with non-parents conditions on the transfer being with someone outside the household,i.e.,it asks about interhousehold transfers.The question regarding transfers with parents does not make this condition.Thus,in order to restrict attention to interhousehold transfers,this second selection is made.'3 Additional selections are made for some Underscore included in questionnaire. Note that the PSID interviews the head of the household,and they assume that the head of the household is the male in two-parent households.We follow their convention. Two surveys that also have some of these attractive qualities are the Health and Retirement Survey and the Asset and Health Dynamies Survey,although both are restricted to older populations. Among the 912 houscholds that were dropped due to these two selections,3.2 percent received AFDC,which is very similar to the share receiving AFDC in the retained sample(2.8 percent.see Table 2). 429
parents?"'0 These transfers do not include court ordered assistance such as child support or alimony. Furthermore, the PSID asks about transfers with each of the respondent's parents and parents-in-law. With regard to time help, the question asked is: "About how many hours in 1987 did they [your parents] spend helping (you/your family living there )?" Respondents are also asked to report the amount of transfers given to parents in both time and money. Finally, transfers of money and time with other relatives and with friends are each reported." In addition to the information on private transfers, the households are asked to provide information regarding each of the head's parents and, if there is a spouse, each of the spouse's parents. This information includes the parents' net wealth, education, distance in miles from respondent's residence, and marital status. Combined with the information collected annually, the PSID data on private transfers have several advantages over data available from most other surveys: Demographic and income characteristics of both the donor and the recipient are available for parental transfers. Furthermore, the information regarding the parent is more extensive than in other surveys. Data on transfers of money and time assistance, both given and received, are collected. Data on both where a transfer was made and the magnitude of the transfer are collected. In households where there is a spouse, transfers are recorded to and from the spouse's parents. Furthermore, characteristics of the spouse's parents are ascertained. The PSID has an extensive set of socioeconomic information on the household being interviewed and the individuals within the household. Since it is a panel study, the PSID has information for more than one year, although the reliable data on private transfers are only available in 1988.12 Two sample selections were made for the analyses below. First, households in which the head changed between 1987 and 1988 were eliminated, which consisted of 492 cases; this is done to insure that private transfers that were made in 1987 and reported in 1988 are attributed to the correct household head. Second, if the head of the household and the head's parents or parents-in-law live in the same household, the observation is dropped. This reduces the sample size by 420, leaving 6,202 households. The question regarding transfers with non-parents conditions on the transfer being with someone outside the household, i.e., it asks about interhousehold transfers. The question regarding transfers with parents does not make this condition. Thus, in order to restrict attention to interhousehold transfers, this second selection is made.I3 Additional selections are made for some 10 Underscore included in questionnaire. "~otc that the PSID interviews the head of the household, and they assume that the head of the household is the male in two-parent households. We follow their convention. I2 Two surveys that also have some of these attractive qualities are the Health and Retirement Surve and the Asset and Health Dynamics Survey, although both are restricted to older populations. lGmong the 912 households that were dropped due to these two selections, 3.2 percent received AFDC, which is very similar to the share receiving AFDC in the retained sample (2.8 percent. see Table 2)
of the analyses,and these selections are identified when the results of those analyses are discussed.Robustness to these selections is also examined. IV.FREQUENCY AND MAGNITUDE OF PRIVATE INTERHOUSEHOLD TRANSFERS:NEW EVIDENCE FROM THE PSID Table 2 reports household income in 1987 broken down by source of income as reported in the 1988 PSID.The average household income from all sources is $35,414.Fifty-two percent of total household income is derived from labor income of the head of the household,while 15 percent is attributable to labor income of the spouse.The average amount of private inter vivos transfers received in 1987 is $398 for the entire sample and $2,104 for the 19 percent receiving them.This compares favorably with MacDonald's (1990)annualized estimate of $397 reported in the NSFH and Moon's(1983)estimate of $316 with the PSID. Private transfers are small relative to labor income.However,relative to public transfers (excluding Social Security),private transfers are received by a TABLE 2 DESCRIPTIVE STATISTICS OF HOUSEHOLD INCOME BY SOURCE OF INCOME FOR ALL HOUSEHOLDS (N=6,165). Mean for Entire Coefficicnt of Percent Percent of Sample Variation Receiving Total Income Income Source (1) (2) (3) (4) Totul Household Income: $35.414 0.963 100 100 Market Income: Lavor income-Head 18.346 1.339 69.1 51.80 Labor income-Spouse 5,150 1.853 36.6 14.84 Other income of Head and Spouse 5,140 3.479 58.2 14.51 Income of Others in the Family 2.259 3.073 23.4 6.41 Unit Private Transfers: Inter vivos transfers 398 6.299 18.9 1.12 Inheritance 312 15.667 1.8 0.88 Social Insurance: Social Security 1.874 1.967 26.2 5.29 Unemployment Compensation 94 5.617 5.4 0.27 Worker's Compensation 79 10.456 2.2 0.22 Public Assistance: Aid to Families with Dependent 88 7.091 2.8 0.25 Children Supplemental Security Income 87 7.184 2.8 0.25 Veteran's Pensions 167 7.964 3.8 0.47 Other Assistance: Other welfare 27 11.593 1.1 0.08 Other retircment 1,141 3.535 15.2 3.22 All other transfers 11 8.853 5.2 0.31 Child support 130 6.335 44 0.37 Note:The statistics within the table are calculated using the 1988 PSID family weights.House- holds with non-positive total household income are excluded. Note that some households do not have a spouse,and income from this source is zero for these households. 430
of the analyses, and these selections are identified when the results of those analyses are discussed. Robustness to these selections is also examined. IV. FREQUENCY AND MAGNITUDE OF PRIVATE INTERHOUSEHOLD TRANSFERS: NEW EVIDENCE FROM THE PSID Table 2 reports household income in 1987 broken down by source of income as reported in the 1988 PSID. The average household income from all sources is $35,414. Fifty-two percent of total household income is derived from labor income of the head of the household, while 15 percent is attributable to labor income of the spouse.I4 The average amount of private inter vivos transfers received in 1987 is $398 for the entire sample and $2,104 for the 19 percent receiving them. This compares favorably with MacDonald's (1990) annualized estimate of $397 reported in the NSFH and Moon's (1983) estimate of $316 with the PSID. Private transfers are small relative to labor income. However, relative to public transfers (excluding Social Security), private transfers are received by a TABLE 2 DESCRIPTIVE STATISTICS OF HOUSEHOLD INCOME BY SOURCE OF INCOME FOR ALL HOUSEHOLDS (N= 6,165). - Mean for Entire Cocfficicnt of Percent Percent of Sample Variation Receiving Total Income Income Source (1) (2) (3) (4) Total Household Income : $35.414 0.963 100 100 Market Itzcome : Lavor income--Head Labor incomc-Spouse Other income of Head and Spouse Income of Others in the Family Unit Private Trcznsfirs: Inter viuos transfers Inhcritancc Social Insurance: Social Security Unemployrncnt Compensation Worker's Compensation Public Assistance: Aid to Families with Dependent Children Supplemental Security Income Veteran's Pensions Other Assistance: Other welfare Other retirement All other transfers Child support Note: The statistics within the table are calculated using the 1988 PSID family weights. Households with non-positive total household income are excluded. 14 Note that some households do not have a spouse, and income from this source is zero for these households
large share of the population and are sizable.Moreover,the average amount received from private transfers is greater than the total amount received from SSI,AFDC,Unemployment Insurance(UI),and Workers Compensation (WC). However,the average amounts of SSI,AFDC,and WC conditional on receipt from the respective program are each larger than the average amount of private transfers received conditional on receipt.Moreover,the most common type of non-market income is Social Security;just over one quarter of all households receive Social Security benefits for an average of S7,152 among recipient households. Several studies (Tomes,1981;Menchik,1980,1988;Wilhelm,1996; Kotlikoff,1988;Modigliani,1988)have analyzed bequests to test theories of private transfers and theories of savings.Table 2 shows that inter vivos transfers are 28 percent larger than bequests.However,although bequests are received by less than 2 percent of respondents in a given year,when a bequest is received it is quite large,with an average of over $17,000. Table 3 reports the proportion of respondents with each type of transfer (i.e., money given,money received,time help given,and time help received)and the average amount transferred by the relationship to the head of the household of the person with whom the transfer was made.Monetary transfers are given by 13 percent of all households for an average of $291 for the entire sample.As was shown in Table 2,monetary transfers are reported being received much more frequently;20 percent of the households received a transfer in 1987 and the mean amount received for the entire sample is about $400.'5.16 Assistance in the form of time help is made more frequently;28 percent of the respondents receive time help for an average of 332 hours per year for those receiving help.Time transfers are reported as being given more often than received(33 percent give),and the amount given,conditional on giving,is higher(354 hours are given). TABLE 3 PRIVATE TRANSFERS BY RELATIONSHIP TO THE HEAD OF THE HOUSEHOLD (N=6,202) Monetary Transfers Time Transfers (Hours) Person with whom Percent Mean Percent Mean Percent Mean Percent Mean transfer was made Giving Given Receiving Received Giving Given Receiving Keceived Any individual 13.3 S291 20.2 S405 33.2 1I7 28.4 93 Parent/parent-in-law 3.1 56 17.6 328 24.0 82 203 66 Child 53 175 0.9 3.8 10 5 6 Sibling 1.7 4 1.7 3 4.0 6 3.8 6 Other relative 1.7 30 1.6 25 2.8 》 1.7 3 Non-relative 20 11 15 6 7.5 12 7.1 10 Note:Means are for the entire sample.The 1988 PSID family weights are used in the calculations above. The calculations reported in Table 3 are slightly different than those in Table 2 because in Table 2 we restrict the analysis to those households with positive household income.This reduces the sample by 37 cases,and the results reported in Table 2 are not sensitive to this selection. In the aggregate for a representative cross-section,the mean amount of money given to other households should equal the mean amount received from other households.Differences in the reported amounts may exist because transfers received include loans and gifts,while transfers given do not explicitly include loans,and loans and gifts cannot be separated in the data.In addition,a separate question regarding monetary transfers received is asked explicitly about each parent and all other relatives,perhaps eliciting a greater amount of assistance than from the one catch-all question about transfers given to others. 431
large share of the population and are sizable. Moreover, the average amount - received from private transfers is greater than the total amount received from SSI, AFDC, Unemployment Insurance (UI), and Workers Compensation (WC). However, the average amounts of SSI, AFDC, and WC conditional on receipt from the respective program are each larger than the average amount of private transfers received conditional on receipt. Moreover, the most common type of non-market income is Social Security; just over one quarter of all households receive Social Security benefits for an average of $7,152 among recipient households. Several studies (Tomes, 198 1 ; Menchik, 1980, 1988 ; Wilhelm, 1996; Kotlikoff, 1988; Modigliani, 1988) have analyzed bequests to test theories of private transfers and theories of savings. Table 2 shows that inter vivos transfers are 28 percent larger than bequests. However, although bequests are received by less than 2 percent of respondents in a given year, when a bequest is received it is quite large, with an average of over $17,000. Table 3 reports the proportion of respondents with each type of transfer (i.e., money given, money received, time help given, and time help received) and the average amount transferred by the relationship to the head of the household of the person with whom the transfer was made. Monetary transfers are given by 13 percent of all households for an average of $291 for the entire sample. As was shown in Table 2, monetary transfers are reported being received much more frequently; 20 percent of the households received a transfer in 1987 and the mean amount received for the entire sample is about $400.~~,'~ Assistance in the form of time help is made more frequently; 28 percent of the respondents receive time help for an average of 332 hours per year for those receiving help. Time transfers are reported as being given more often than received (33 percent give), and the amount given, conditional on giving, is higher (354 hours are given). TABLE 3 Monetary Transfers Time Transfers (Hours) Person with whom Percent Mean Percent Mean Percent Mean Percent Mean transfer was made Giving Given Receiving Received Giving Given Receiving Received Anv individual 13.3 $291 20.2 $405 33.2 117 28.4 93 Parent/parent-in-law 3.1 56 17.6 328 24.0 82 20.3 66 Child 5.3 175 0.9 5 3.8 10 3.5 6 Sibling 1.7 14 1.7 2 1 4.0 6 3.8 6 Other relative 1.7 30 1.6 25 2.8 7 1.7 3 Note: Means are for the entire sample. The 1988 PSID family weights are used in the calculations above. I5 The calculations reported in Table 3 are slightly different than those in Table 2 because in Table 2 we restrict the analysis to those households with positive household income. This reduces the sample by 37 cases, and the results reported in Table 2 are not sensitive to this selection. 16 In the aggregate for a representative cross-section, the mean amount of money given to other households should equal the mean amount received from other households. Differences in the reported amounts may exist because transfers received include loans and gifts, while transfers given do not explicitly include loans, and loans and gifts cannot be separated in the data. In addition, a separate question regarding monetary transfers received is asked explicitly about each parent and all other relatives, perhaps eliciting a greater amount of assistance than from the one catch-all question about transfers given to others