Luc Arrondel

Family Transfers Involving Three Generations

Most models of family intergenerational transfers consider only two generations (parents and children) and focus on two motives for parental transfers : altruism and exchange, while assuming almost perfect susbtitution between inter vivos transfers and bequests. Based upon French evidence, this paper shows, on the contrary, that inter vivos downward transfers, made at quite distant date over the life cycle, belong to three distinct categories, according to the main objective pursued by parents : investment in childs education ; financial assistance ; wealth transmission (being susbtitutes for bequests only in the third case). Moreover, the domain of the analysis of familial behavior is expanded from two to three generations. French data do indeed show that, for each type of downward transfer, parents are strongly influenced by the behavior of their own parents ; moreover, for upward transfers, there is some, less robust, evidence of typical behaviors similar to Cox and Stark demonstration effect : parents help their own (old) parents, expecting to receive comparable support in old days from their children. Such behaviors can however be given different interpretations (that all blur the distinction between altruistic and exchange motives) : imitation ; transmission of family values or norms ; preference shaping of formation ; indirect reciprocities, where the beneficiary of a transfer does not give back to the initial giver but to a third person of another generation.

Taxation and wealth transmission in France

We examine the pattern of inter-vivos transfers and bequests in France, using both administrative records and household surveys. We first present the French institutional and fiscal setting of wealth transmission; then the usual economic models of behaviour, their link to fiscal system and their testable predictions. Finally we turn to empirical tests, concentrating on inter-vivos gifts. We examine whether observed behaviour is consistent with the models and with the incentives implied by the tax system. We find no direct support for altruism, nor for exchange, but a strong reaction to taxation, which may be interpreted by a `joy of giving type of model.

Risk Management and Wealth Accumulation Behavior in France

In a prevailing climate of increasing uncertainty (rising risk of unemployment, pension funding problems and unstable family structures), French households have adopted new saving behavior reflected during the nineties, primarily by considerable investment in life insurance products (representing more than 50 percent of financial saving). Recent theoretical saving models have placed greater emphasis on studying prudent behavior in the face of an uncertain future and have shown the influences of multiple risks and borrowing constraints on precautionary savings and portfolio choices. In this vein, a household exposed to a high future income risk or strong liquidity constraints may increase its savings, reduce its investments in risky assets and increase its share of liquid investments. In this paper, wealth accumulation and their relation to these new factors will be specifically studied. Empirical tests on recent French data (Patrimoine 97) show the relevance of subjective earnings variance to explain wealth accumulation but its contribution is not very large.

Bequests and inheritance: empirical issues and France-U.S. comparison

Inheritance has long been a favoured research topic in the social sciences. Marxists viewed it as a privileged channel of class reproduction from one generation to the next. In anthropological studies of traditional or primitive societies, it plays a major role in revealing the structure of kinship relations and in the exchange of words, women and goods. Psychosociologists consider it first of all as a moment of crisis, but also one of truth, when hidden family links and relations to siblings, lineage and marriage are suddenly brought to light; moreover, they insist upon the double dimension, ‘symbolic’ (or sentimental) and economic, of inherited goods, and upon their process of ‘appropriation’ — how the heir must ‘identify’ himself with these family goods and then decide what to do with them (either keep them, or sell them, or whatever).