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Map of South America |
Email this citationCIAO DATE: 05/05
Parental Wealth Effects on Living Standards and Asset Holdings: Results from Chile
Florencia Torche and Seymour Spilerman
November 2004
Abstract
This paper examines aspects of the replication of inequality across generations and attempts to assess the extent to which parental resources influence the life chances and living standards of adult children. We expect household wealth to be a critical matter, especially in a society in which there is a weak public safety net or in which the credit market is inefficient. In the former case, families need to self-insure--accumulate savings to smooth consumption expenditures over periods of income fluctuation, such as might result from illness or job loss. In the latter case, financial wealth is necessary in order to finance large expenditure items (e.g., a home, a new business) or to provide collateral in seeking a bank loan for such an expenditure.
These considerations can be especially relevant to the welfare of children and young adults. In the absence of public support programs, poor families may have difficulty keeping children in school, especially teen-age children, and forgoing the earnings that would otherwise be brought to the household. Such calculations, it is recognized, are responsible for the high drop out rate from middle school, noted for less developed countries (Moser 1998). Similarly, substantial costs are often involved in establishing a new household, which can pose a major burden for a young couple that has had little time in which to accumulate savings (Spilerman 2004). In each case, parental assets can play a critical role in advancing the life chances and economic well-being of offspring.
