Parental transfers and the labor supply of children

To finance their personal consumption, children may rely on transfers in the form of pocket money made by their parents and on personal resources earned from labor market activities. In this paper that focuses on the interaction between these two sources of income, we consider a model of parental transfer where the child can choose his own income through labor supply. The parent commits to a transfer amount that the child takes as given. For our empirical analysis, we use a cross-sectional French survey that includes detailed information about pocket money from parents to schoolchildren. Using a maximum-likelihood method, we estimate a simultaneous-equations model and find that parental transfers do not significantly influence the child's labor supply.