An exchange motive in upstream intergenerational transfers: evidence from South Korea

ABSTRACT

This paper examines the exchange motive behind upstream intergenerational transfers from the adult children to their elderly parents in Korea. While the altruistic motive has been extensively studied, evidence on the exchange motive behind private transfers, i.e. that transfers are provided in exchange for the service provided by the recipient, has been relatively scarce. To test for the presence of exchange motive, childcare provided to grandchildren by elderly parents is used to measure service provision. Using a family fixed effect model, we find that elderly parents who provide care for their grandchildren are more likely to receive transfers, and more likely to receive a larger amount of transfer, providing evidence on the operation of an exchange motive in upstream transfers. We further show that this motive operates mainly through regular transfers and not through irregular transfers.

KEYWORDS:

• Intergenerational transfer
• motivation of private transfer
• exchange motive
• old age

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. As the preferred specification will be family fixed effect, characteristics of the elderly parent will be absorbed and hence summary statistics are reported for child characteristics.

2. The difference between care and care last year is the timing of care provision. The variable care takes a value of one if the elderly parent has ever provided care to a grandchild at any point in the past and zero otherwise. Care last year indicates that the elderly parent provided care to a grandchild last year, implying that the provision of care service occurred recently and may have continued to the current point in time.

3. In Asian culture, or in countries with Confucianism culture, old age support responsibility is often imposed on sons or the first son.

4. The units of transfer are in 10,000 KRW. To roughly convert to USD, I will use 1USD to 1000 KRW exchange rate henceforth.

5. Robust standard errors are clustered at the elderly parent level, allowing for correlations in errors across adult children for a given elderly parent.

6. As probit regression is a nonlinear regression model, in order to include any sort of fixed effect, linear probability model is preferred over probit.

7. Note that for the regression, to make regular and irregular transfers comparable, we use yearly converted values of regular transfer, by multiplying 12 to reported regular transfer amount.

Additional information

Funding

We thank the New Faculty Research Grant of University of Seoul.

Notes on contributors

Hyelim Son

Hyelim Son is an assistant professor at the School of Economics, University of Seoul. She received her PhD degree in economics from Columbia University. Her research interest includes public economics and development economics.