Bequests Motives and Private Transfers in India

Households transfer substantial wealth between generations under various motives. Apart from life cycle consumption smoothing and old age security purposes, parents transfer wealth to children with motivations of altruism, exchange, strategic or risk sharing. Theoretically, altruism predicts a one to one correspondence between parental income and child income. Under exchange, transfer is positively related to the services provided by the child. When strategic motive is operative, the ex ante transfer is motivated by the services provided by each child. This paper empirically examines the transfer motives in India using a 2006-07 primary data from 315 urban households. The decision on transfer is estimated by Probit equation and the size of transfer is estimated by Tobit equation with parental and child characteristics. The estimated results show that the basic motivation for transfer is one of exchange. Indian households exchange wealth largely for the support and services provided by the children.