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Living arrangement and caregiving expectation: the effect of residential proximity on inter vivos transfer

Abstract

Informal care by adult children provides important support for frail seniors, yet it is unclear whether this costly service is balanced by parents’ financial transfers. This paper examines how family living arrangements affect parents’ relationship with their children. Specifically, it investigates whether a child’s residence affect parents’ decision in making financial gifts, and whether this relationship is based on their expectation to receive care in the future. Results show that children in closer proximity are more likely to receive transfers from their parents on both the intensive and extensive margins. A closer examination of the effects reveals that the difference can be at least partially explained by the increased likelihood of care provision when a child is living in closer proximity. The findings suggest that today’s residential location could be a signal in indicating a child’s prospect of providing care and thus affects parents’ decision in making financial gifts. It also reaffirms the interdependency between caregiving and residential decisions and calls attention to its roles in shaping intergenerational relationship.

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Fig. 1
Fig. 2
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Fig. 4

Notes

  1. 1.

    Equation 2 can be rearranged as Substitute Eq. 5 into Eq. 1, and Eq. 4 can then be derived.

  2. 2.
    $$\begin{array}{@{}rcl@{}} T_{i,t} & =& \gamma_{1} \cdot E_{t}(c_{i,t + 1}) + \gamma_{2} \cdot c_{i,t} \\ & = &\gamma_{1} (\beta_{0} + \beta_{1} \cdot E_{t}(d_{i,t + 1}) )+ \gamma_{2} \cdot c_{i,t}\qquad\qquad \text{by Eq.~2}\\ & =& \gamma_{1} \beta_{0} + \gamma_{1} \beta_{1} \alpha \cdot d_{i,t} + \gamma_{2} \cdot c_{i,t} \qquad\qquad\qquad \text{by Eq.~3} \end{array} $$
  3. 3.

    To obtain Eq. 7, first modify the care function in Eq. 2 to include a variable that could interact with the proximity’s effect on care provision:

    $$\begin{array}{@{}rcl@{}} C_{i,t} &= & \beta_{0} + \beta_{1} d_{i,t} + \beta_{2} g_{i} + \beta_{3} g_{i} d_{i,t} + \epsilon_{i,t} \\ && \beta_{1} \le 0, \; \beta_{2} \ge 0, \; \beta_{3} \le 0 \end{array} $$
    (8)

    In the example, \(g_{i} = 1\) indicates child i is female. The gender difference in providing care is captured by the positive \(\beta _{2}\), and the negative effect of long distance on a child’s ability to provide care is captured by the negative sign for \(\beta _{1}\). However, the total impact of proximity on care provision for female children is modified by β3, which is the differences in the differences of proximity effects between male and female children. Assuming the increases in the likelihood to provide care when a child moves closer is higher for female than male children, I expect \(\beta _{3}\) to be negative.

    Substitute Eq. 8 into 1, and Eq. 7 can then be derived:

    $$\begin{array}{@{}rcl@{}} T_{i,t} & =& \gamma_{1}(\beta_{0} + \beta_{1} E_{t}(d_{i,t + 1}) + \beta_{2} g_{i} + \beta_{3} g_{i} E_{t}(d_{i,t + 1})) + \gamma_{2} c_{i,t} \\ & =& \gamma_{1} \beta_{0} + \gamma_{1} \beta_{2} \cdot g_{i} + \gamma_{1}\alpha(\beta_{1}+\beta_{3} g_{i}) \cdot d_{i,t} + \gamma_{2} \cdot c_{i,t} \end{array} $$
  4. 4.

    If I factor in the financial transfers from the child in the same period, the net transfer from parents can be negative. However, such cases are rare and do not change the results.

  5. 5.

    The majority of children (84%) did not receive transfers from parents in a given wave.

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Acknowledgments

I would like to express my immense gratitude to Professor Emeritus Neil Bruce, Professor Emeritus Robert D. Plotnick, Professor Jennifer Romich, and Professor Rachel Heath for their guidance during the course of the research. I would also like to thank the anonymous reviewers for sharing their insights on the manuscript and the audiences at several conferences for their comments on an earlier version of the manuscript.

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Correspondence to Chien-Hao Fu.

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Fu, CH. Living arrangement and caregiving expectation: the effect of residential proximity on inter vivos transfer. J Popul Econ 32, 247–275 (2019). https://doi.org/10.1007/s00148-018-0699-7

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Keywords

  • Informal care
  • Long-term care
  • Inter vivos transfer
  • Intergenerational transfer
  • Family exchange

JEL Classification

  • I13
  • I38
  • J14