Parental net wealth and personal consumption

This paper uses data from the 1988 to 1991 PSID to examine the relationship between parental net wealth and consumption behavior of adult children. In a model where the probability of receiving a future transfer from the parent is an increasing function of the level of parental net wealth, a non-linear relationship is expected. The results in this study are consistent with such a relationship. Parental net wealth is found to have a positive influence on children’s consumption only at very high levels. In addition, this relationship appears to apply only to parental housing wealth and not parental non-housing wealth.