What Do Parents Know About Their Children? Misperceptions of Wellbeing and Implications on Resource Allocations in the Family
Marwa AlFakhri1
1Duke University

The family is becoming increasingly more important as a source of financial support given current demographic trends such as an aging population, increased life expectancy, and prolonged transition to adulthood. Yet, transfers within the family may be insufficiently compensating for adverse conditions due to imperfect information sharing in the family network. I use novel data from the Add Health, Add Health Parent Study, and Panel Study of Income Dynamics to document incidence of misperceptions in the family by contrasting parent’s reporting of their adult child wellbeing with the child’s reporting. In this paper, I make two main contributions. First, I present descriptive evidence for misperceptions by documenting the incidence of asymmetric information in the family and explore how it relates to determinants such as family structure, demographics, geographic distance and social distance. Second, I examine whether misperception have direct impact on transfers and resource allocation in the family.