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January 06, 2014

Are Economic Values Transmitted from Parents to Children?

Marco Cipriani, Paola Giuliano, and Olivier Jeanne

Economic research shows that differences in cultural traits and values—for example, trust, or the propensity to cooperate and not free-ride on others—are important determinants of economic outcomes, such as growth, economic and financial development, and international trade. It’s much less clear, however, where these differences in economic-relevant values come from. While economists generally assume that they’re transmitted from parents to children, the empirical evidence to this effect is almost nonexistent.

     In a recently published paper, we tried to fill this gap by studying whether economic-relevant attitudes of children resemble those of their parents. We focus on what we call “pro-sociality,” that is, the importance attached to contributing to a common good. In the study, a sample of children and their parents play a public goods game—a standard way of measuring a person’s level of “pro-social” behavior. We then compare the pro-sociality of the children with that of their parents to see if they are related.

The Public Goods Game
In a public goods game, a subject is assigned to a group of, for instance, four people. Each person in the group is given some money, let’s say $1, and asked to share it between him or herself and a group fund. Contributions to the group fund are multiplied by two and divided equally between members of the group independently of how much they contributed to the group fund.

     Of course, if all members of the group keep their endowments for themselves, they each get to keep their $1. In contrast, since contributions to the group fund are doubled, if each member of the group contributes his or her endowment to the fund, each member ends up with $2, which is a clearly superior outcome. Nevertheless, an individual’s choice of how to behave in a public goods game is not a simple one. Let’s say that you’re playing the game and all the people in your group contribute their $1 endowment. If you do the same, everyone ends up with $2. If, however, you decide not to contribute, you keep your $1 and still receive $1.50 from the group fund, leaving you with a total of $2.50. For you as an individual, not contributing to the fund is better than contributing.

     In other words, in a public goods game there’s a tension between what’s good for the group and what’s good for the individual. Although it’s better for the group as a whole that everyone contributes his or her own endowment, each member of the group individually has an incentive to keep the endowment and free-ride on the others. This problem is very similar to the decision of fixing the roof in an apartment building: everyone enjoys the new roof, including those who didn’t contribute to it; as a result, everyone has an incentive not to pay for the roof repairs and let the neighbors fix it.

     Public goods games have been studied extensively by economists. They find that individuals usually contribute between 40 and 60 percent of the maximum amount ($1 in our example), depending on how the game is implemented. Because contributing has a positive effect on the group as a whole, an individual’s contribution can be taken as an indicator of his or her pro-sociality.

     The behavior of both children and parents in the new study was similar to that found in previous work: parents contributed 58 percent of the maximum amount, and children contributed just slightly less, at 55 percent. However, was the behavior of the children similar to that of their parents? In other words, was there evidence from how the game was played that pro-sociality is transmitted from parents to children?

Like Mother Like Son?
The answer is no. The data don’t show any correlation between a parent’s contribution and that of his or her child. In other words, there’s no evidence that pro-social behavior is transmitted from parents to children. This finding is robust to several specifications that we used to analyze the data.

     Of course, many caveats are in order. It’s possible that abstract games like the one we used aren’t the best way of capturing people’s attitudes toward contributing to a public good. The sample we studied (children in a Washington, D.C., public school and their parents) may not be representative, and different results may be obtained when looking at different segments of the population. Partial understanding of the game by young children may have also confounded the results.

     Nevertheless, the absence of transmission of economic-relevant values from parents to children is very surprising. An unchallenged assumption in the economic literature on values and economic outcomes is the idea that the family has an important role in transmitting these values across generations. Our results provide an important piece of evidence to the contrary, which calls for further work on the issue.

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Marco Cipriani is a senior economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

Paola Giuliano is a professor of economics at the University of California, Los Angeles.

Olivier Jeanne is a professor of economics at Johns Hopkins University.

Posted by Blog Author at 07:00:00 AM in Labor Economics

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Age might also come into play (it might be covered already, but I have not read the whole paper). It might be that the evolution of the attitude towards a public good over time trumps the direct transmission mechanism. There might also be a cohort effect that needs to be controlled for.

Maybe we don't turn into our parents until we have children of our own?

This is not surprising when you look at more recent psychology research that challenges the notion that mothers are most important for shaping children. It's the peer group that dominates, especially after age 6. Just think about it - children of immigrants do not pick up their parent's accents and cultural traditions. They adopt their peer group's. This is what will lead an individual to the greatest chance of life success.

My own experience and casual observation is that parents' financial

behavior (thrift or indulgence) is observed and repeated by children when

grown up. This might be better studied by examining credit ratings and debt

by generation.

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