Two-Sided Transfers from Adult Children of Elderly Persons

We build an intergenerational transfer model in which an adult child provides elder care to his parents and monetary transfers to his children based on his own income. Under an assumption that the adult child is concerned about his own future care, we make the following theoretical prediction: an adult child provides elder care for his parents and monetary transfer to his children based on monetary transfer from his elderly parents only if the adult child expects that his child will provide him future elder care. Empirical findings based on the sample drawn from the Health and Retirement Study are consistent with the theoretical prediction. Our findings indicate that the expectation of adult children regarding whether their children will provide future elder care critically determines their decisions regarding the provision of elder care to their elderly parents and monetary transfers to their children