Informal Care and intergenerational transfers in European Countries

In a world in which the welfare state is under pressure, understanding the dynamic effects of money transfers from parents to adult children and their relationship with informal care can be relevant for policy purposes. We use the first two waves of the Survey of Health and Retirement in Europe (SHARE) to estimate a double-hurdle model for a parental decision to provide financial support for adult children and the amount involved, taking into account the potential endogeneity of informal caregiving. We find that informal caregivers receive less frequent transfers and less generous amounts than non-caregivers. This offers support for the idea of a form of sophisticated altruistic behavior, according to which caregiving costs are outweighed by the parent’s benefits. Regarding public policies, we find that while increased unemployment benefits would not generate any crowding-out effect in parental transfers, a reduction in long-term public care benefits has a negative multiplier effect on parental transfers.