Survival of the gene, intergenerational transfers and precautionary saving

This paper provides a model of bequest and investment in children's human capital at low incomes. It posits that parents and children are linked through their common concern of grandchildren and intergenerational transfers provide a material basis for the perpetuation of the family line. The model characterizes intergenerational strategic interactions in a dynamic game theoretical framework. Moreover, it explores intergenerational uncertainty as a source of precautionary saving. In contrast with the existing literature, the model implies that there are qualitative differences between precautionary saving from one's own income uncertainty and precautionary bequests from children's income uncertainty.