Interhousehold transfers between relatives in Indonesia: Determinants and motives

Abstract

This article employs the data from the First Indonesian Family Survey (IFLS-1) of 1993. Using detailed information on the socioeconomic status of donors and recipients provided by the data, we estimate transfer-amount equations for each type of transfer and examine what motivates interhousehold transfers in Indonesia. The transfer-amount equations are estimated using individual-level data of transfers and characteristics, with potential correlations among individuals from the same household taken into account. The estimation results of transfer-amount equations indicate that a single motive cannot explain the transfers and that motives differ according to the donor-recipient relationship. Parental transfers to children seem to be intended to relieve children of liquidity constraints and to compensate them for filial services. Children's transfers are estimated to be targeted toward older parents and widowed mothers. They are also likely to some extent to be substitutes for filial services. Intersibling transfers are, among the three, qualitatively most consistent with the characteristics of altruistic transfers. Tests of derivative conditions, however, indicate that none of the transfers are motivated by pure altruism. The balance of the article is organized as follows. Section II discusses various motives for transfers suggested by the previous literature. Section III presents the empirical model of transfer decisions, and Section IV discusses the data. Estimation results for each type of transfers are analyzed in Section V. Section VI concludes the article.