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Bequests and Informal Long-Term Care: Evidence from the HRS Exit Interviews

Max Groneck and Frederic Krehl

University of Cologne, Working Paper Series in Economics No. 79, 2014

Keywords: Intergenerational Transfers, Strategic Bequest Motive, Informal Long-term care, Altruism

Informal care of children for their frail elderly parents may induce parents to compensate their children for their help. To test this hypothesis, we use the Exit Interview from the Health and Retirement Study. Our results show that caregiving has a significant positive impact on the incidence and the amount of received bequests both at the extensive and intensive margin of help. Three pieces of evidence suggest exchange motives rather than altruism to be the main source for this outcome. First, financially more well off
 children are more likely to receive an inheritance. Second, we find that a positive impact of help on bequest requires a written will as a contract between the parent and the helping child. Third, our results are even more pronounced when employing a fixed effects model to control for family altruism.

Bequests and Informal Long-Term Care: Evidence from the HRS Exit Interviews