Expectations versus Realizations of Familial Insurance: Evidence from the Great Recession of 2008

Donald Cox, Boston College
Megan M. Way, Babson College

What happens to intergenerational transfers with the onset of a recession? Economists have long recognized transfers might serve to insure against the risk of income shortfalls. Yet there is little evidence about how transfers might vary over the business cycle because few data sets collect such information over time. One that has is the Health and Retirement Survey (HRS), which includes the first year of the Great Recession of 2008, with supplemental data for 2009. A priori, it is not clear whether inter-household transfers should increase during a recession—problems of potential recipients become more severe, but resources of potential donors become less plentiful. The question therefore becomes an empirical one. We find evidence of increased giving from older parents to adult children as the recession deepened, despite significant declines in parental wealth. We also find correlations between pre-recession subjective probability measures regarding giving and actual giving during the recession.