Research

Outside Research/Working Papers

Inter Vivos Transfers and Choice of College Major (Job Market Paper)

Abstract: I find evidence that parents affect their child's career choice through inter vivos transfers. Embedding an occupational choice model into an overlapping generations framework with altruism, I show children with wealthy parents favor jobs that have riskier income streams relative to their expected earnings because high-income parents can insure their children against large negative earnings shocks. Using the 1997 cohort from the National Longitudinal Study of Youth, I rank major fields of study according to two measures of earnings uncertainty. I then use a multinomial logit to show that children of higher income parents select into fields with higher earnings uncertainty. The empirical results suggest that child decisions are consistent with the theory that inter vivos transfers act as an insurance mechanism for college children. To further this hypothesis, I study a subgroup of college students with higher earnings uncertainty: first generation students. I show that first generation students are less likely to select into fields where the earnings uncertainty is disproportionately high.

Gender Differences in Inter Vivos Transfers

To what extent do parents exhibit preferential treatment for one gender with respect to financial gifts to children? Using the Health and Retirement Study from 1992-2014, I estimate differences in the frequency and magnitude of gifts to sons and daughters. Conditional on a transfer, there is no evidence of differences in amounts between sons and daughters. However parents give to daughters at higher rates. I explore potential mechanisms for this disparity: in particular, I address the altruism and exchange motives for inter vivos transfers. I find that the difference in giving rates is partially explained by higher expected rates of future care from daughters. Even after controlling for discrepancy in care-taking, income levels, and other observable characteristics, parents are still 10-20% more likely to give a transfer to their daughters. The discrepancy in giving rates is driven by unmarried children: once daughters marry they are less likely to receive a transfer.

Pecuniary and Nonpecuniary Major Choice Factors

College majors carry both monetary (high expected earnings, job security) and nonmonetary (enjoyment, social change) benefits. This paper analyzes the trade-offs between the pecuniary and nonpecuniary benefits associated with various fields students pursue in college. Initial findings suggest that children with wealthier parents are much more likely to choose a major for nonpecuniary reasons. Additionally, gender is an important factor as women are significantly more likely to favor nonpecuniary benefits. The magnitude of the gender effect is approximately equivalent to an extra $100,000 in parent's income.

Inter Vivos Transfers over the Life Cycle

This paper emphasizes the importance of analyzing inter vivos transfers from parents to their adult children in a dynamic setting. First, I use panel data from the Health and Retirement Survey to analyze stylized facts. Consistent with previous studies, I find that inter vivos transfers are large and highly heterogeneous. Parental wealth and other demographic features such as number of children in the family are strong predictors, however time variant variables such as child current income and schooling are important as well. Parents directly respond to changes in their child's income. Besides direct financing of a college education, I explore two additional channels in which inter vivos transfers may influence child welfare over the life cycle: insurance against labor income risk and insurance against human capital risk. Using an OLG framework, I show that these additional insurance channels can effect the child's college decisions.