INTERGENERATIONAL TRANSFERS AND CAPITAL-MARKET IMPERFECTIONS - EVIDENCE FROM A CROSS-SECTION OF ITALIAN HOUSEHOLDS

We investigate whether a system of family finance exists and to what extent it is able to offset capital market imperfections. A simple model of intergenerational transfers implies that the probability of a liquidity constrained consumer receiving a transfer is negatively correlated with his current endowment and positively correlated with his future resources. We test this proposition using a recent survey of Italian households in which both transfer recipients and liquidity constrained households are readily observable. The results indicate that private transfers help to ease borrowing constraints. However, a substantial number of liquidity constrained households remain after transfers have been made. © 1991.