A growing body of evidence indicates that liquidity constraints could affect a substantial proportion of U. S. consumers, but little is known about why these constraints might exist. An important, but little-explored, issue is the relationship between inter vivos intergenerational transfers and liquidity constraints. These transfers can ease borrowing constraints. Empirical transfer patterns match those predicted from a model in which transfers are allocated to liquidity-constrained consumers. In particular, the distinction between current and permanent incomes of potential recipients is a key aspect of private-transfer behavior. The findings have important implications for our understanding of consumer behavior.

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Private income transfers are becoming increasingly recognized as a key aspect of the U.S. economy. The majority of private income transfers occur inter vivos (i.e., between living persons), but very little is known about this type of transfer behavior. This paper tests alternative hypotheses concerning motivation for inter vivos transfers. Two motives are considered: altruism and exchange. Evidence presented here casts doubt on the altruistic model of transfer behavior. Observed patterns for inter vivos transfers are more consistent with exchange-related motives. This finding has important implications for the effects of public transfer programs on the distribution of economic well-being. Copyright 1987 by University of Chicago Press.

This paper investigates the connection between credit rationing and private intergenerational transfers. The research is motivated by the idea that private transfers may be a source of funds for consumers who have difficulty borrowing from financial intermediaries. This idea has important implications for consumer behavior, and economists have begun to think about it, but they have given it little empirical attention. Using the 1983 Survey of Consumer Finances, we find that private transfers do tend to be targeted toward consumers who face credit rationing. But we also find that a substantial fraction of U.S. consumers are liquidity-constrained even if one allows for the possibility of private transfers.

The surge of interest in intergenerational transfers in the past decade has sparked a debate over the motivation for them. Are transfers given out of altruism or part of an exchange? While each motive is probably at work to some extent, they know little about whether one motive predominates. The question is relevant for issues concerning public income redistribution and inequality in the family but despite its importance, empirical evidence about motives is scarce because of limited data. They investigate a new data set, the National Survey of Families and Households, which remedies many of the shortcomings of other data sets containing private transfer information. They find that empirical patterns for inter-vivos transfers (i.e., transfers between living persons) are more consistent with exchange than altruism. Copyright 1992 by MIT Press.