Does the exchange motive influence intergenerational transfers? Evidence from Ireland

This article examines the exchange motive in intergenerational monetary transfers. The exchange motive is in operation if parents make transfers to their children in exchange for services. The analysis incorporates data on current inter vivos transfers and the self-assessed probability of making future transfers via bequests. The focus is on the correlation between child-provided help and transfers from parents to adult children. Cross-sectionally, small transfers (between EUR 250 and EUR 5,000) and child-provided help are positively related. Endogeneity arising from omitted variables and reverse causality are addressed by using a lagged value of child-provided help. Further, in an analysis of first-differenced data, the association is statistically significant at the 10% level of confidence. The correlation is not significant in the case of large (above EUR 5,000) transfers, or the self-assessed probability of making future transfers via bequests. These findings suggest that small inter vivos transfers may be driven by exchange motives, although the findings are also consistent with altruism.