The specific aims of this proposal are 1) to improve understanding of household consumption choice and labor supply decisions and the role of the extended family in thee decisions, 2) to understand the economic motivation underlying family exchange, 3) to understand whether the individual, the household, or the extended family constitutes the basic economic decision-making unit, 4) to study the timing, magnitude, and cause of intra- and intergenerational transfers, and 5) to study heterogeneity in the transfer behavior of extended families and in their influence on consumption choice and labor supply. The proposed study will be based on three data sets that have received little or no attention to date. The first is the respondent=-child spinoff linked PSID (RC-PSID). This data set refers to the combination of data on the original PSID adult respondents with information subsequently collected on their adult children who are referred to as PSID spinoffs. These parent-child linked PSID data represent a remarkable data base covering an important component of the extended family - namely parents and their adult children. The second data source is the Consumer Expenditure Survey (CES), that has been ongoing since 1980. In addition to providing excellent data on consumption, the CES includes data on labor supply and assets. These data are extremely well suited to test several alternative models of consumption choice and to examine the role of liquidity constraints in consumption decisions. The third data set is 1988 PSID Kinship Supplement (KS-PSID) which will be released at the beginning of the second year of the proposed project. This data, which was collected as part of the 1988 wave of the PSID, contains extensive questions concerning financial transfers and transfers in the form of time made and received during 1987. The project will 1) use the RC-PSID to conduct new direct tests of altruistic linkages within the extended family, 2) use the CES data to conduct basic tests of intertemporal optimal consumption and labor supply choice and liquidity constraints, 3) use the KS=PSID, the RC=PSID, and PSID to produce detailed cross section and time series descriptions of transfers within the extended family. Each of these three tasks will compliment the others.
