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The Effect of Social Entitlement Programmes on Private Transfers: New Evidence of Crowding Out


Economica / NEW SERIES

Published online on


This paper exploits a policy experiment to identify the crowding‐out effects of public transfers on the incidence and level of private transfers. The introduction of a large social security programme in Taiwan is used to estimate the effect of an exogenous increase in government transfer payments to the elderly on the private transfer behaviour of their adult children. Using an instrumental variables strategy that accounts for the endogeneity of receiving public transfers, the empirical results show some evidence of crowding out on the extensive margin of private transfers.