EXPLORING THE DETERMINANTS OF TRANSFER BETWEEN PARENTS AND THEIR ADULT CHILDREN: EVIDENCE FROM INDONESIA

Abstract

We estimate the determinants of net transfers between elderly parents and children using the Indonesia Life Family Survey (IFLS) Data. In contrast to past studies, we use richer data, by including all four waves of the IFLS data. We also use a different methodology, choosing different instruments for the endogenous variables. The transfer behaviour is further examined by stratifying data into different sub samples, and assumption that parents' income is exogenous is further relaxed. Similar results as past studies such as Raut and Tran (2006) are obtained, where parents' and children's income have the expected sign. However, only the children's income is statistically significant in net transfer behaviour. Our findings that the children income is statistically significant in affecting the net transfers behaviour has policy implications. This might mean that government transfers to the adult children has the indirect effect of raising the impoverished elderly welfare as well, since the children will transfer half of their income to their parents.