Horioka Bequests

BEQUEST MOTIVES AND
PARENT-CHILD RELATIONS
IN THE U S JAPAN ANDIN THE U.S., JAPAN, AND
CHINACHINA
CHARLES YUJI HORIOKA
Institute of Social and Ec. Research
Osaka UniversityOsaka University
March 2009
1

The Purpose of This PresentationThe Purpose of This Presentation
Th f thi t ti i t tThe purpose of this presentation is to present a
variety of data and results on altruism, bequest
motives, bequest division, and parent-childmotives, bequest division, and parent child
relations in the United States, Japan, and China
for two reasons:
(1) In order to shed light on which theoretical model
of household behavior applies in the three
countries andcountries and
(2) In order to shed light on whether different
models of household behavior apply in the threemodels of household behavior apply in the three
countries.
2

Theoretical Models of Household
Behavior (1)
(1) The selfish life cycle model
Assumes that individuals care only abouty
themselves
(2) The altruism model(2) The altruism model
Assumes that individuals harbor intergenerational
altruism toward their childrenaltruism toward their children
3

Theoretical Models of Household
Behavior (2)
(3) The dynasty model
Assumes that individuals care about the
perpetuation of the family line and/or the family
business.
(4) Social norms and traditions
Assumes that individuals behave in accordanceAssumes that individuals behave in accordance
with social norms and traditions even if it is not
rational to do sorational to do so.
4

f fImplications of Each Model for
Bequest Motives BequestBequest Motives, Bequest
Division, and Parent-Child
Relations
Each of these models of household behavior
has different implications for bequesthas different implications for bequest
motives, bequest division, and parent-child
relationsrelations.
5

(1) The Selfish Life Cycle Model(1) The Selfish Life Cycle Model
B t ti L b t lBequest motive: Leave no bequests, leave
only unintended bequests arising from
lifespan uncertainty, and/or leave
bequests only if one’s children provide
care and/or financial support during old
age.
Bequest division: Leave more or all to the
child who provides more care and/orchild who provides more care and/or
financial support during old age.
6

(2) The Altruism Model(2) The Altruism Model
Bequest motive: Leave bequests even if
one’s children do not provide care and/orp
financial support during old age and do not
carry on the family line and/or the familycarry on the family line and/or the family
business.
Bequest division: Divide equally or leave
more or all to the child who has greaterg
needs and/or less earnings capacity.
7

(3) The Dynasty Model(3) The Dynasty Model
Bequest motive: Leave bequests only if
one’s children carry on the family liney y
and/or the family business.
Bequest division: Leave more or all to theBequest division: Leave more or all to the
child who carries on the family line and/or
fthe family business.
8

(4) Social norms & traditions(4) Social norms & traditions
Bequest motive: Leave the entire bequest to
the eldest son because this is the social
norm in Japan. Similarly, the eldest son
(and his wife) take care of his parents(and his wife) take care of his parents
because this is the social norm in Japan.
SBequest division: See above.
9

Thus, each theoretical model of household
behavior has very difficult implications fory p
bequest motives and bequest division, and
thus we can shed light on whichthus we can shed light on which
theoretical model of household behavior
applies in the real world by looking atapplies in the real world by looking at
individuals’ bequest motives and bequest
division.
10

Data SourcesData Sources
I will present data from a number of surveys
for which I was the principal investigator orp p g
co-investigator.
11

Data Source (1)Data Source (1)
The “U.S.-Japan Comparison Survey of
Saving (Chochiku ni kansuru Nichibeig (
Hikaku Chousa),” conducted in the United
States and Japan in 1996 by the formerStates and Japan in 1996 by the former
Institute of Posts and Telecommunications
of the former Japanese Ministry of Postsof the former Japanese Ministry of Posts
and Telecommunications
12

The “Survey on Preferences toward, and
Satisfaction with, Life (Kurashi no Konomi, (
to Manzokudo ni tsuite no Anke-to),”
conducted annually since 2005 in Japanconducted annually since 2005 in Japan,
annually since 2006 in the United States,
and also in China and India by the Twentyand also in China and India by the Twenty-
first Century and Global Center of
Excellence (COE) Programs at Osaka
University
13
y

The “Parent-Child Survey (Oyako Chousa),”
conducted in the United States and Japanp
in 2006 by the Twenty-first Century Center
of Excellence Program at Osakaof Excellence Program at Osaka
University as a supplement to the “Survey
on Preferences toward and Satisfactionon Preferences toward, and Satisfaction
with, Life”
14

The “Survey on Intra-Household Distribution
and Inter-generational Transfers (Setai-naig (
Bunpai/Sedai-kan Iten ni kansuru Kenkyuu
Chousa) ” conducted in Japan in 2006 byChousa), conducted in Japan in 2006 by
the Institute for Research on Household
Economics (Kakei Keizai Kenkyuu sho)Economics (Kakei Keizai Kenkyuu-sho)
15

(1) Data on Altruism(1) Data on Altruism
• Americans and the Japanese are roughly
equal in the prevalence of altruism towardq p
family members but Americans are far
more altruistic toward charitiesmore altruistic toward charities.
• The Chinese are less altruistic toward
f ffamily members but far more altruistic
toward charities.
16

INTERNATIONAL COMPARISON OF ALTRUISM TOWARDS PARENTS
70.0
50.0
60.0
40.0
20.0
30.0
10.0
0.0
Percent willing to give at
least 10% to their parents
63.2 61.4 46.6
U.S. Japan China
17

INTERNATIONAL COMPARISON OF ALTRUISM TOWARDS CHILDRENINTERNATIONAL COMPARISON OF ALTRUISM TOWARDS CHILDREN
70.0
50.0
60.0
40.0
20.0
30.0
10.0
0.0
Percent willing to give at least 10% to their
children
59.7 61.1
U.S. Japan
18

INTERNATIONAL COMPARISON OF ALTRUISM TOWARD CHARITIES (NO MATCHING)
60.0
50.0
30.0
40.0
20.0
10.0
0.0
Percent willing to give at least 10% to
charities
14.0 4.3 53.6
U.S. Japan China
19

INTERNATIONAL COMPARISON OF ALTRUISM TOWARD CHARITIES (WITH MATCHING)INTERNATIONAL COMPARISON OF ALTRUISM TOWARD CHARITIES (WITH MATCHING)
16 0
18.0
14.0
16.0
10.0
12.0
6.0
8.0
2.0
4.0
0.0
Percent willing to give at least 10% to
charities (matching)
15.8 5.4
U.S. Japan
20

(2) Data on the Strength of(2) Data on the Strength of
Bequest Motives
• Bequest motives are by far the strongest
in China, second strongest in the United
States, and weakest in Japan., p
21

INTERNATIONAL COMPARISON OF THE STRENGTH OF BEQUEST MOTIVESINTERNATIONAL COMPARISON OF THE STRENGTH OF BEQUEST MOTIVES
70
50
60
40
20
30
10
20
0
Percent wanting to leave a bequest to their
children
44.71 18.09 59.26
U.S. Japan China
22

U S JAPAN COMPARISON OF THE STRENGTH OF BEQUEST MOTIVES (1996)U.S.-JAPAN COMPARISON OF THE STRENGTH OF BEQUEST MOTIVES (1996)
120.00
100.00
60.00
80.00
40.00
20.00
0.00
U.S. 45.94 51.13 97.07 2.93
Japan 25.67 69.33 95.00 5.00
Intended bequests Unintended bequests Bequests No bequests
23

(3) Data on the Nature of Bequest(3) Data on the Nature of Bequest
Motives
• Bequest motives are far more altruistic in
the United States than they are in Japan.
24

U.S.-JAPAN COMPARISON OF THE NATURE OF BEQUEST MOTIVES (1996)
80.00
60.00
70.00
40.00
50.00
30.00
40.00
10.00
20.00
0.00
U.S. 3.40 51.13 2.93 42.53
Japan 6.39 69.33 5.00 19.28
Conditional on care Accidental only No bequest Unconditional
25

U.S.-JAPAN COMPARISON OF THE NATURE OF BEQUEST MOTIVES (1996)
80
90
60
70
40
50
30
40
10
20
0
U.S. 57.47 42.53
Japan 80.72 19.28
Selfish life cycle model Altruism model
26

(4) Data on Bequest Division(4) Data on Bequest Division
• Bequest division is far more altruistic in the
United States than it is in Japan.p
27

U.S.-JAPAN COMPARISON OF BEQUEST DIVISION (1996)Q ( )
80.00
90.00
60.00
70.00
40.00
50.00
20 00
30.00
40.00
0 00
10.00
20.00
0.00
U.S. 2.93 3.09 84.10 0.41 0.41 2.16 6.90
Japan 5.00 29.21 44.17 1.75 5.73 7.71 6.43
No bequests
More to child who
provides care
Divide equally
More to child with
less income
More to child who
takes over the
family business
More to eldest
child even if
he/she doesn't
Other
28

U S JAPAN COMPARISON OF BEQUEST DIVISION (1996)U.S.-JAPAN COMPARISON OF BEQUEST DIVISION (1996)
80 00
90.00
70.00
80.00
50.00
60.00
30.00
40.00
10.00
20.00
0.00
U.S. 6.02 84.51 2.57
Japan 34.21 45.92 13.44
Selfish life cycle model Altruism model Dynasty model
29

(5) Data on the Impact of Parental( ) p
Bequest Motives on Children’s
B h iBehavior
• Parental bequest motives have a far• Parental bequest motives have a far
stronger impact on children’s behavior in
Japan that they do in the United StatesJapan that they do in the United States,
suggesting that not only parents but also
children are more selfish (less altruistic) inchildren are more selfish (less altruistic) in
Japan.
30

IMPACT OF PARENTAL BEQUEST MOTIVES ON CORESIDENCE (U.S.)Q ( )
14.00
10.00
12.00
8.00
4 00
6.00
2.00
4.00
0.00
coresidence rate 6.67 7.53 12.02 7.69 10.05
bequest conditional on
care
unconditional bequest
unintentional bequests
only
no bequests overall
31

IMPACT OF PARENTAL BEQUEST MOTIVES ON CORESIDENCE (JAPAN)
70.00
50.00
60.00
40.00
20.00
30.00
10.00
20.00
0.00
coresidence rate 63.89 63.46 49.45 25.00 49.70
bequest conditional on
care
unconditional bequest
unintentional bequests
only
no bequests overall
32

IMPACT OF WIFE'S PARENTS' BEQUEST MOTIVES ON CHILDREN'S BEHAVIOR
100
70
80
90
50
60
70
30
40
50
10
20
30
0
Bequest expect's 52.85 90.18 22.48
No bequest expect's 50.21 79.59 8.03
Financial support Care Coresidence
33
No bequest expects

IMPACT OF HUSBAND'S PARENTS' BEQUEST MOTIVES ON CHILDREN'S BEHAVIORIMPACT OF HUSBAND S PARENTS BEQUEST MOTIVES ON CHILDREN S BEHAVIOR
90
100
70
80
50
60
20
30
40
0
10
20
Fi i l t C C id
Bequest expect's 58.45 90.76 46.17
No bequest expect's 50.99 70.64 19.79
Financial support Care Coresidence
34

Wakabayashi & Horioka (2007)(1)Wakabayashi & Horioka (2007)(1)
This paper analyzes the determinants of theThis paper analyzes the determinants of the
living arrangements (coresidence
behavior) of elderly parents and theirbehavior) of elderly parents and their
children (whether elderly parents live with
their children and if so with which child) intheir children, and if so, with which child) in
Japan using micro data from the 1998
“National Family Survey ” In so doing weNational Family Survey. In so doing, we
try to shed light on which theoretical model
of household behavior applies in Japanof household behavior applies in Japan.
35

This paper makes at least two originalThis paper makes at least two original
contributions:
(1)It is the first to take account of sibling(1)It is the first to take account of sibling
composition.
(2)It is the first to conduct an explicit test of
the importance of social norms and
traditions.
36

Principal findings (1):Principal findings (1):
(1)Parents who were (relatively wealthy)
executives before retirement are moreexecutives before retirement are more
likely to live with their children.
(2)Parents who are homeowners are more
likely to live with their children.
(3)Parents are more likely to live with less
educated children.educated children.
Consistent with the selfish life cycle model
(or the altruism model)
37
(or the altruism model)

(4) Parents who were self-employed before
retirement are more likely to live with theirretirement are more likely to live with their
children.
(5) Parents are less likely to live with sons
who adopt their wife’s surname.
(6) Parents are more likely to live with
daughters whose husbands adopt theirdaughters whose husbands adopt their
surname.
Consistent with the dynasty model
38
Consistent with the dynasty model.

(7) Parental attitudes toward parent-child
relations affect their coresidence behaviorrelations affect their coresidence behavior.
(8) Parents are more likely to live with their
eldest child if their eldest child is a son.
(9) Parents are most likely to live with their(9) Parents are most likely to live with their
eldest son even if he is not the eldest child.
Consistent with social norms andConsistent with social norms and
traditions.
39

• Thus our findings concerning theThus, our findings concerning the
determinants of the living arrangements
(coresidence behavior) of elderly parents(coresidence behavior) of elderly parents
and their children are consistent with all
four theoretical models of householdfour theoretical models of household
behavior, especially the selfish life cycle
model and the dynasty model both ofmodel and the dynasty model, both of
which presuppose selfish behavior, and
with social norms and traditionswith social norms and traditions.
40

Overall Conclusions (1)Overall Conclusions (1)
• Americans are more altruistic toward both family
members as well as charities than the Japanese.
• The altruism model is far more applicable in the
United States than it is in Japan, whereas the
selfish life cycle model is far more applicable in
Japan than it is in the United States.
• The dynasty model is of limited applicability in
both countries but more applicable in Japan thanboth countries but more applicable in Japan than
it is in the United States.
41

Overall Conclusions (2)Overall Conclusions (2)
• Children provide more care to their parents inp p
Japan than they do in the United States but
their behavior is motivated by selfishtheir behavior is motivated by selfish
considerations—that is, care of parents by
children is motivated by a desire to receive achildren is motivated by a desire to receive a
bequest and conversely (a la the strategic
bequest motive of Bernheim Shleifer andbequest motive of Bernheim, Shleifer and
Summers (1985)).
• Thus, the greater incidence of care of parents
by children in Japan is consistent with the great-
42
er prevalence of the selfish life cycle model).

Overall Conclusion (3)Overall Conclusion (3)
• The Chinese are NOT altruistic toward
parents but ARE altruistic toward childrenp
and charities. Why???
43

Directions for Future ResearchDirections for Future Research
• What are the causes of the considerableWhat are the causes of the considerable
cross-country differences in the degree of
altruism?altruism?
• Are they due to differences in genes?y g
• Are they due to differences in culture?
A th d t diff i li i it ?• Are they due to differences in religiosity?
• Are they do to differences in tax systemsy y
(for example, tax breaks for charitable
contributions)?
44
contributions)?

Policy Implications (1)Policy Implications (1)
• The fact that the Japanese are selfish
implies that Ricardian equivalence willp q
NOT hold and that tax cuts financed by the
issuance of government bonds WILL beissuance of government bonds WILL be
effective as an economic stimulus, and
conversely for Americansconversely for Americans.
45

Policy Implications (2)Policy Implications (2)
• The fact that the Japanese are selfish
implies that wealth inequalities will NOT bep q
passed on from generation to generation
because people will either not leave anybecause people will either not leave any
bequest at all or will leave bequests only if
there is a quid pro quo meaning that netthere is a quid pro quo, meaning that net
intergenerational transfers are negligible,
and conversely for Americans.
46

Thank you very much for your
tt ti !!attention!!
47

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