Parental Priorities and Economic Inequality

by Casey B. Mulligan

Chapter XI

Intergenerational Altruism and Inequality within the Family

While the child neutrality assumption is useful to isolate certain effects of altruism formation on the intergenerational transmission of inequality, this chapter derives more results for inequality by considering differences among siblings. The model of altruism predicts that parents can aggravate inequality within the family, that divorce reduces parental concern for children, and that parental concern for children discourages divorce.

The model has somewhat different implications for the intragenerational distribution of resources than do standard models. I emphasize what the implications mean for interpreting several empirical studies of family transfers, such as those showing that birth order, family size, family composition and some childhood variables are correlated with economic outcomes later in children's lives. I question several interpretations of evidence on intergenerational transfers.

This Chapter considers "parents" who choose altruism and transfers for each of two children. However, other interpretations are available. For example, one could think of a donor who is choosing among several charities. Issues of free-riding (off of other donors) and imperfect information are probably especially important for the analysis of giving outside the family and are explored in more detail in the next two chapters.

© copyright 1996, Casey B. Mulligan.