Linking Income, Transfers, and Social Support in an Agent-Based Family Exchange Model

Abstract

The positive relationship between income and old-age survival is well established. It is, however, less clear whether wealthier individuals live longer because they can afford certain goods and services not available to people with lower incomes, or because of indirect factors. This project investigates the role of intergenerational exchange in the relationship between income and mortality. In the previous literature on the link between income and longevity, this factor has seldom been analysed. We develop an agent-based model to examine the exchange relationship in a two-generational family. In the model, older parents use increases in their pension income as intergenerational transfers to younger family members, and receive emotional or functional support in return. Taking advantage of the natural experiment of the German reunification, we estimate our model using realistic demographic, economic, and time use data. Our results imply that intra-familial resource exchange is beneficial for both the health of older parents and the living conditions of adult children in times of economic uncertainty. The findings therefore suggest that increases in pension income may affect old-age survival, both directly through the amenities elderly people can buy with the additional income, and indirectly through intergenerational transfers that incentivise adult children to provide support to their parents.