Local Gossip and Intergenerational Family Transfers

• In Event: Formal Political Economy

Abstract

In the era of population aging, families are an important source of welfare provision. Individuals provide education and nutrition to their children and nursing care to their elderly parents. Why do families work as a welfare provider? Why are generous transfers made in some families and not in others? This paper explains how these intergenerational "contracts" can be sustained and argues that differences in intergenerational cooperation are due to variation in neighbors' gossiping. This paper provides an explanation for the emergence of populist welfare policies in East Asia.

My analysis posits game-theoretical models of overlapping generations in which breadwinners make transfers to their parents and children. A novel feature of my model is that there is a local community that may supply information about its members' past behaviors. I find that gossip plays a crucial role as information for sustaining the intergenerational cooperation within families. More specifically, an efficient level of intergenerational transfers can be sustained if and only if neighbors gossip about each other. My findings are consistent with the known empirical evidence that social pressure facilitates people to take care of their elderly parents.

Author

• Yuki Takagi, Department of Political Science, Stanford University