Do Intergenerational Transfers From Elderly Parents Increase Social Inequality Among Their Middle-Aged Children? Evidence from the German Aging Survey

Abstract

This study examines the consequences of private intergenerational transfers from elderly parents to their middle-aged children with respect to social inequality within the children's generation. With use of the nationally representative cross-sectional sample of the German Aging Survey, descriptive analyses as well as multivariate logistic regressions are used to identify the effects of three different types of private intergenerational transfers in the middle-age group (40-54 year olds, n = 1,719 for inter vivos and n = 1,446 for mortis causa transfers). Transfers from parents or parents-in-law during the last 12 months-many of them smaller ones-are not significantly related to children's income. Separated and divorced children have significantly higher probabilities of receiving such transfers, indicating a need-directed family transfer process. Larger transfers before the last 12 months are need directed as well and moreover positively related to income position. Bequests, finally, are positively related to income position while having no need component at the time of observation. Whereas larger monetary transfers and bequests may increase social inequality in the children's generation, a substantial part of the regular monetary flow from elderly parents to their adult children buffers situations of need. Public policy should take into account these different effects. Reducing the general level of public pensions would weaken regular transfer giving and thus lead to more inequality in the children's generation. Higher taxation of very large transfers and bequests would have the opposite effect.