Family transfers involving three generations

Most models of family transfers consider only two generations and focus on two motives: altruism and exchange. They also assume perfect substitution b etween inter-vivos downward transfers and bequests. Based on French evidenc e, we show that parent-to-child transfers belong to three distinct categori es (investment in child's education, financial assistance, wealth transmiss ion), and advocate a three-generation framework. Thus, transfer behavior of parents toward their children is strongly influenced by the behavior of th eir own parents. There is also some evidence of the Cox and Stark demonstra tion effect: parents help their own parents, expecting to receive comparabl e support from their children. Such behavior can be regarded as indirect re ciprocity: the beneficiary does not give back to the initial giver but to a third person of another generation.