"My Father was right": The transmission of values between generations

The influence of parents' savings behaviour on that of their children has often been remarked. This paper attempts to explain this "poids d'Anchise" via a unique French dataset collected by DELTA and TNSSofres in 2002, which contains both savings and subjective information for two or three generations of the same family. Parents' and children's risk and discounting preferences are significantly positively intergenerationally correlated. The correlation coefficients are around 0.25, so that the two preferences are nonetheless far from identical. In addition, the elasticity of children's wealth with respect to that of their parents is around 0.22. This correlation is corrected for the influence of age on wealth, and concerns only co-existing generations, that is before the most significant intergenerational transfers have taken place. The analysis of the raw correlations with a series of explanatory variables reveals that over 40% of this elasticity can be explained by the permanent incomes of the two generations. Each of education and preferences separately account for about 20%, and previous intergenerational transfers for about 13%. When permanent income is controlled for, the contribution of savings preferences is around 13%. The transmission of preferences therefore plays a non-negligible role in the intergenerational transmission of wealth inequalities, but is far from being the most important factor.saving preferences ; wealth ; intergnerationnal inequalities

Risk and time preferences: saver types

In an extended variant of the life-cycle hypothesis, saving behaviour is shown to depend crucially on the interaction between two preference parameters : γ, which represents risk attitudes (aversion, prudence...), and δ, the rate of time depreciation. Hence, the predictions of four specific accumulation regimes : the Armchair investors (high γ, low δ) ; the Entreprising (low γ, low δ) ; the Hotheads (low γ, high δ) ; and the Short-sighted prudent (high γ, high δ). The Insee "Patrimoine 1997" survey allows to obtain global relative measures of the two preference parameters. An econometric analysis of the amount and composition of wealth shows then that this savers' typology has sizeable explanatory power, with effects as predicted. Ceteris paribus, "armchair investors" accumulate more wealth than other households. Hotheads own less homes and Pep (insurance saving products), short-sighted prudent less (often) stocks, and these two types of savers invest less in long-term saving (whether for housing or retirement) than the other categories.risk aversion ; time preference ; wealth ; portfolio choice

"My Father was right": The transmission of values between generations

"My Father was right" is the title of a play (and a film) by Sacha Guitry: I was like you and you will be like me. My father was right.The influence of parents' savings behaviour on that of their children has often been remarked. This paper attempts to explain this "poids d'Anchise" via a unique French dataset collected by DELTA and TNSSofres in 2002, which contains both savings and subjective information for two or three generations of the same family. Parents' and children's risk and discounting preferences are significantly positively intergenerationally correlated. The correlation coefficients are around 0.25, so that the two preferences are nonetheless far from identical. In addition, the elasticity of children's wealth with respect to that of their parents is around 0.22. This correlation is corrected for the influence of age on wealth, and concerns only co-existing generations, that is before the most significant intergenerational transfers have taken place. The analysis of the raw correlations with a series of explanatory variables reveals that over 40% of this elasticity can be explained by the permanent incomes of the two generations. Each of education and preferences separately account for about 20%, and previous intergenerational transfers for about 13%. When permanent income is controlled for, the contribution of savings preferences is around 13%. The transmission of preferences therefore plays a non-negligible role in the intergenerational transmission of wealth inequalities, but is far from being the most important factor.En France, l'influence des comportements patrimoniaux des parents sur celui de leurs enfants a souvent été mise en évidence. Comment expliquer alors ce "poids d'Anchise" ? Dans cet article, nous utilisons une enquête originale française et unique initiée par le Delta et TNS-Sofres en 2002 dans laquelle nous disposons à la fois d'informations patrimoniales et subjectives pour deux générations. En rapprochant les préférences vis-à-vis de l'épargne des parents et des enfants concernant leurs attitudes face au risque et à l'avenir, nous obtenons des corrélations intergénérationnelles significatives, de l'ordre de 0,25 qui ne justifient cependant pas une similarité parfaite. Par ailleurs, l'élasticité de la richesse des enfants par rapport à celle de leurs parents se situe autour de 0,22. Cette mesure est corrigée des effets d'âge et concerne les patrimoines de deux générations coexistantes, c'est-à-dire avant que le gros des transferts intergénérationnels ait eu lieu. Plus de 40% de cette élasticité peut être expliqué (directement ou indirectement) par les niveaux de revenu permanent des deux générations. Les niveaux d'éducation et les préférences y contribuent chacun pour un cinquième, les transferts intergénérationnels déjà effectués pour 13%. La contribution des goûts de l'épargnant est encore de 13% lorsque l'on tient compte également des revenus permanents. Même si elle n'est pas la seule, la transmission des préférences joue donc un rôle non négligeable dans la transmission des inégalités de patrimoine

"Mon père avait raison" : la transmission des valeurs entre les générations

En France, l'influence des comportements patrimoniaux des parents sur celui de leurs enfants a souvent été mise en évidence. Comment expliquer alors ce "poids d'Anchise" ? Dans cet article, nous utilisons une enquête originale française et unique initiée par le Delta et TNS-Sofres en 2002 dans laquelle nous disposons à la fois d'informations patrimoniales et subjectives pour deux générations. En rapprochant les préférences vis-à-vis de l'épargne des parents et des enfants concernant leurs attitudes face au risque et à l'avenir, nous obtenons des corrélations intergénérationnelles significatives, de l'ordre de 0,25 qui ne justifient cependant pas une similarité parfaite. Par ailleurs, l'élasticité de la richesse des enfants par rapport à celle de leurs parents se situe autour de 0,22. Cette mesure est corrigée des effets d'âge et concerne les patrimoines de deux générations coexistantes, c'est-à-dire avant que le gros des transferts intergénérationnels ait eu lieu. Plus de 40% de cette élasticité peut être expliqué (directement ou indirectement) par les niveaux de revenu permanent des deux générations. Les niveaux d'éducation et les préférences y contribuent chacun pour un cinquième, les transferts intergénérationnels déjà effectués pour 13%. La contribution des goûts de l'épargnant est encore de 13% lorsque l'on tient compte également des revenus permanents. Même si elle n'est pas la seule, la transmission des préférences joue donc un rôle non négligeable dans la transmission des inégalités de patrimoine.préférences de l'épargnant ; patrimoine ; inégalités intergénérationnelles

"For richer, for poorer": savings preferences and choice of spouse

Do couples share the same values? The social sciences have mainly concentrated on comparing the socioeconomic characteristics of spouses, but rarely their preferences to risk and time. In this paper, we use conventional measurements and an original method. We find that spouses are very similar in their savings preferences, even when we control for the individual characteristics. These conclusions are decisive in explaining wealth inequalities between households, since homogamy causes a divide in the population. However, if the correlation between preferences and wealth is clear when measured at the household level, spouses with opposite attitudes tend to be richer for some parameters

Risk and time preferences: saver types

In an extended variant of the life-cycle hypothesis, saving behaviour is shown to depend crucially on the interaction between two preference parameters : γ, which represents risk attitudes (aversion, prudence...), and δ, the rate of time depreciation. Hence, the predictions of four specific accumulation regimes : the Armchair investors (high γ, low δ) ; the Entreprising (low γ, low δ) ; the Hotheads (low γ, high δ) ; and the Short-sighted prudent (high γ, high δ). The Insee "Patrimoine 1997" survey allows to obtain global relative measures of the two preference parameters. An econometric analysis of the amount and composition of wealth shows then that this savers' typology has sizeable explanatory power, with effects as predicted. Ceteris paribus, "armchair investors" accumulate more wealth than other households. Hotheads own less homes and Pep (insurance saving products), short-sighted prudent less (often) stocks, and these two types of savers invest less in long-term saving (whether for housing or retirement) than the other categories.Selon la théorie de cycle de vie, le consommateur/épargnant maximise, sous diverses contraintes, une fonction d'utilité définie sur son horizon de vie: le comportement de ce dernier dépendra alors de paramètres de préférence personnels, soit de ses attitudes à l'égard du risque et du temps. Dans ce cadre, tout est fait pour séparer ces préférences ("aversion" et autres attitudes) à l'égard du risque, γ, de celles à l'égard du temps (préférence pour le présent), δ, en les caractérisant par des paramètres définis indépendamment. Paradoxalement, les prédictions de la plupart des modèles vont dépendre de manière cruciale de l'interaction entre les deux séries de paramètres : savoir seulement que l'individu est "risquophile", ou bien "myope" n'apporte qu'une connaissance limitée ; savoir qu'il est les deux à la fois renseigne bien davantage sur ses décisions d'épargne et de composition du patrimoine. On peut alors caractériser le comportement prédit pour quatre types d'agents : les bons pères de famille (γ élevé, δ faible), les entreprenants (γ faible, δ faible), les têtes brûlées (γ faible, δ élevé), les cigales prudentes (γ élevé, δ élevé). Une enquête récente de l'INSEE ("Patrimoine 1997") conforte la validité empirique des prédictions dans le cas de la France. A travers plus de 80 questions balayant divers domaines de la vie, on a construit pour chaque enquêté, sous forme de "scores" qualitatifs, des indicateurs relatifs de son attitude à l'égard du risque et de son degré de prévoyance à long terme. Comme prévu, le croisement des deux paramètres de préférence offre les conclusions les plus intéressantes. L'analyse économétrique du montant et de la composition du patrimoine accorde un pouvoir explicatif appréciable aux paramètres introduits en combinaison. Toutes choses égales d'ailleurs, les "bons pères de famille" accumulent sensiblement plus que les autres ; à l'inverse, les têtes brûlées détiennent moins de produits d'épargne-retraite que les autres, et la détention d'actions apparaît significativement la plus faible dans le groupe des cigales prudentes

Book Review: Flood Stage and Rising

Jane Varley\u27s Flood Stage and Rising opens with what becomes the haunting echo of the narrative, how far north should we go? The north of the Great Plains impresses itself on Varley\u27s consciousness immediately when she observes, the land was flat. So flat it looked bizarre. In order to begin her PhD studies, she and her husband Gary move from one landscape (the lush greenery and hills of Virginia) to the rich diluvian river bed of Grand Forks, North Dakota. A Great Plains town that inspires tall tales, Grand Forks is built on the edge of the Red River, the last remnant of the great Agassiz Basin. Undeterred by such a contrasting landscape from what they have known, and ready for adventure in a new location, Varley and her husband learn both the beauty and bizarreness of life on the Great Plains

Taxing more (large) family bequests: why, when, where?

There is a capital taxation puzzle in most developed countries. Since the 1960s, revenues from wealth transfer taxation have been especially low and decreasing as a percentage of GDP, even to the extent of disappearing in quite a number of cases; by contrast, lifetime wealth or capital taxation generates much higher revenues and shows no decreasing trend. The full tax puzzle is certainly not easy to explain. Many usual explanations of the aversion to wealth transfer taxation also imply limited lifetime capital taxation: they cannot justify the very strong collective preference for lifetime capital taxation observed in most countries. On the other hand, capital market imperfections may explain higher levels of lifetime capital taxation, but not the diverging trends of the two components of capital taxation. We think that a key explanatory factor of the tax puzzle in general and of the growing unpopularity of wealth transfer taxation in particular stems from the rising role of family values and links: the family appears to be the only safe investment nowadays in the face of risky globalized markets and the feared retrenchment of the welfare state. Any realistic reform must take this social and political constraint into account. Most reformist economists think that lifetime wealth or capital taxation could act as quite an efficient substitute for too unpopular taxes on wealth transfers. We offer an alternative solution which recommends heavier and more progressive taxation on family inheritances (only) while allowing for various legal loopholes to avoid the tax. It could hence prompt parents driven by family altruism to increase (early) inter vivos transfers to their progeny and people driven by social altruism to make more charitable gifts and bequests, and would bring in additional and welcome revenues

Temperant portfolio choice and background risk: evidence from France

We explore empirically whether earnings uncertainty and borrowing constraints deter households from the stockmarket, consistent with the predictions of theoretical studies of portfolio choice in the presence of uninsurable earnings. Recent extensions highlight the importance of the correlation between earnings and financial risks. We use a self-assessed proxy for the correlation from the DELTA-TNS 2002 cross-sectional survey. While income risk does not deter from the stockmarket those households' reporting a negative correlation, it does for those who report a non-negative sign, consistent with economic theory predictions.portfolio choice ; background risk ; risk aversion ; prudence ; temperance

Measuring savers' preferences how and why?

Measuring individual preferences of savers have two main motivations: to reduce the share of non-observed heterogeneity in explaining households' wealth behaviors, and to construct more accurate tests of the theories of savings and portfolio choices. For France, we have constructed a unique data set, the PAT€R surveys (PATrimony and Preferences vis-à-vis Time and Risk), with the first survey made in 1998 by interview with Insee, and the following surveys conducted by Tns-Sofres via postal questionnaires: PAT€R-2002 focused on the transmission of preferences between parents and children; the three subsequent waves, PAT€R-2007-2009-2011, were conducted in May 2007 (before the crisis), June 2009 and November 2011, on more than 3600 households representative of the French population, with an important panel dimension - about 2000 households were interviewed at least twice, and nearly 1100 households were present in all three waves. Almost each survey replicates direct measures of risk attitudes as well as time preference found in the literature, such as the hypothetical lottery on income of Barsky et al. (1997), selfreported 0-to-10 scales concerning the willingness to take risks in various contexts (Dohmen et al., 2011), or even experimental measures. Yet these measures, based upon a limited number of questions, suffer from serious drawbacks that are analyzed in the paper. This is why we have developed an alternative method of scoring in order to measure three types of preferences, towards risk, time, and offspring (altruism) : synthetic and ordinal scores of preferences are derived from the responses given to a large number of (mainly) simple real-life questions covering different life domains of life (consumption, leisure, health, investments, work, retirement, family). No single question is satisfactory by itself, but the idea is that if a number of questions possess a common dimension, towards risk for instance, this dimension will be isolated by aggregating the replies, beyond framing effects, measurement errors, etc.: the score obtained will then show enough internal consistency, as measured by psychometric tests. Ultimately, the data will thus determine how many indicators - if any - should be introduced for each type of preference. On the five surveys, this scoring method has proved very consistent and robust. Derived from some 60 questions, one single score of preference towards risk was sufficient in each wave (with Cronbach's alpha near 0.7). As regards time depreciation, two scores were each time necessary, marking the contrast between the short term and impulsive choices ("short-term impatience") on the one hand, and the long term and more reasoned decisions "time preference" over the life cycle) on the other. One single score of altruism was retained. he contents of these four scores are very similar from one wave to the next, as well as their individual determinants, their individual correlation over time, the degree of correlation between scores, etc. Finally, the effect of these scores on the level and composition of wealth are similar across surveys, in line with theoretical predictions, and more significant than those obtained for alternate measures of preferences which suffer, moreover, from endogeneity biases