The sibling crowd-in effect of time and cash assistance to elderly parents

Abstract

PurposeThe purpose of the current study is to analyze how the assistance that one's siblings provide to their parents impacts one's own contributions. Siblings' assistance is measured as the total combined number of hours and the total combined cash that one's siblings provide, excluding one's own level of contributions.Design/methodology/approachWe use first differences and instrumental variables approaches to address unobserved heterogeneity and endogeneity of assistance provided to one's parents.FindingsA 10 percent increase in siblings' time and cash assistance is associated with an increase in the individual levels of adult children's time contributions by about 6.72 percent and cash contributions by 7.43 percent.Practical implicationsCrowd-in is meaningful from a policy perspective as it suggests that upstream transfers are unlikely to crowd-out similar transfers from siblings. Private transfers are unlikely to decrease in response to public transfers.Social implicationsPolicy that incentivizes private transfers from one individual may lead to increased levels of transfers from their siblings. Policies such as tax incentives that encourage contributions from adult children are likely to have a magnified effect.Originality/valueOur approach is novel in that we utilize data on full sibling sets using the children of the Health and Retirement Study respondents. This allows the consideration of crowding effects that transfers from siblings have. Other authors perform tests to determine whether or not altruistic transfer motives are present. With altruistic motives, public transfers are expected to crowd-out private transfers. Our approach focuses on crowding behavior regardless of the underlying motives.