Living arrangements of the elderly in China: evidence from the CHARLS national baseline

Declining fertility in China has raised concerns about elderly support, especially when public support is inadequate. Using rich information from the nationally representative China Health and Retirement Longitudinal Study (CHARLS) baseline survey, we describe the patterns of current living arrangements of the Chinese elderly and investigate their determinants and correlation with intergenerational transfers. We find that roughly 41% of Chinese aged 60 and over live with an adult child; living with a male adult child being strongly preferred. However another 34% have an adult child living in the same immediate neighborhood and 14% in the same county; only 5% have an adult child with none of them living in the same county. At the same time, a large fraction of the elderly, 45% in our sample, live alone or with only a spouse. In general, women, those from western provinces, and those from rural areas are more likely to live with or close to their adult children than their corresponding counterparts, but different types of intergenerational transfers play a supplementary role in the unequal distribution of living arrangements. Among non-co-resident children, those living close by visit their parents more frequently and have more communications by other means. In contrast, children who live farther away are more likely to send financial and in-kind transfers and send larger amounts.     

私人代际转移动机研究*——基于CHARLS的实证分析

经济学家对代际的物质和时间转移的兴趣引发了人们对转移动机的研究与思考。传统的解释有两种：利他主义与交换互惠。本文利用CHARLS数据，对中国的代际转移动机进行实证研究，发现受传统文化的影响，中国的代际转移更多地表现出利他主义倾向，同时示范效应也有所体现，即个体在照顾父母的同时也在教育自己的孩子赡养父母，以期退休后得到子女的照顾。相对西方国家来说，我国养老金体系的压力较小。但随着老龄化的加剧和生育率的下降，为了缓解未来独生子女赡养双方父母的压力，应当在减少挤出私人代际转移的基础上完善社会保障体系，提高我国老年人口的生活质量。     

Family Transfers Involving Three Generations

Most models of family transfers consider only two generations and focus on two motives: altruism and exchange. They also assume perfect substitution between inter-vivos downward transfers and bequests. Based on French evidence, we show that parent-to-child transfers belong to three distinct categories (investment in child's education, financial assistance, wealth transmission), and advocate a three -generation framework. Thus, transfer behavior of parents toward their children is strongly influenced by the behavior of their own parents. There is also some evidence of the Cox and Stark demonstration effect: parents help their own parents, expecting to receive comparable support from their children. Such behavior can be regarded as indirect reciprocity : the beneficiary does not give back to the initial giver but to a third person of another generation.
JEL classification : D 10; D 31; D 63; D 64     

Optimal long-term care policy in an intergenerational exchange setting

We examine the optimality of public long-term care policy, incorporating an exchange game between elderly parents and adult children and transfer-seeking competition among siblings, instead of children's altruism. Results reveal that when children compete to obtain more valuable bequests from parents in exchange for elderly care, public long-term care policy is optimal if government can provide long-term care more efficiently than children can, thereby reducing parental bequests, possibly to zero. This is likely to be the case when children's wages are high. Formal long-term care might not be necessary if parents can receive adequate informal care in exchange for bequests to children with low wages.     

Opting out and topping up reconsidered: Informal care under uncertain altruism

We study the design of public long‐term care (LTC) insurance when the altruism of informal caregivers is uncertain. We consider non‐linear policies where the LTC transfer depends on the level of informal care, which is assumed to be observable, while children's altruism is not. Our policy encompasses two policies traditionally considered in the literature: topping up policies consisting of a transfer independent of informal care, and opting out policies entailing a positive transfer only if children fail to provide care. We show that both total and informal care should increase with the children's level of altruism. This is obtained under full and asymmetric information. Public LTC transfers, on the other hand, may be non‐monotonic. Under asymmetric information, public LTC transfers are lower than their full information level for the parents whose children are the least altruistic, while it is distorted upward for the highest level of altruism. This is explained by the need to provide incentives to highly altruistic children. In contrast to both topping up and opting out policies, the implementing contract is always such that social care increases with informal care.     

Free‐Riding and the Provision of Public Goods in the Family: A Laboratory Experiment*

We examine the provision of family public goods using experimental economics methods. With sufficient altruism and shared resource arrangements, families can provide the efficient level of family public goods. Becker's Rotten Kid Theorem asserts that transfers from altruistic parents will induce children to maximize family income even if children are not altruistic toward other family members. Consistent with altruism, parents and children contributed more to a public good when in groups with family members than when in groups with strangers. In contrast to the predictions of the Rotten Kid Theorem, however, children's behavior fell short of maximizing family income.     

Do First‐Time House Buyers Receive Financial Transfers from Their Parents?*

Using Danish longitudinal data with information about wealth for a sample of first‐time house buyers and their parents, we test whether there are direct financial transfers from parents to children in connection with the house purchase, or in connection with unemployment spells occurring just after the purchase, when children typically hold few liquid assets. First, we document that child and parent financial resources are correlated. Then, we introduce conditioning variables and exploit the panel aspect of the data to also condition on fixed unobserved factors, which arguably govern preferences and/or productivity. We find no evidence of direct financial transfers.     

Social Security and Growth in an Altruistic Economy

This paper studies the macroeconomic impact of private and public intergenerational transfers in the presence of endogenous growth. It focuses on two-sided altruism implying that individuals have both a motive to make gifts to their parents and a motive to leave bequests to their children. The growth effects of social security depend on whether children are making gifts to their parents or parents are leaving bequests to their children. Which of the transfers is operative, in turn, depends on the size of social security benefits. Social security is legislated endogenously. The introduction of a social security program which definitely reduces per capita income growth and harms future generations is contemplated by altruistic individuals even if non-altruistic individuals disapprove it.     

Intergenerational transfers,demographic transition,and altruism: Problems in developing Asia

This paper develops a three‐period overlapping‐generations model where middle‐aged agents care about not only their own lifetime utility but also their old parents' and children's well‐being. The doubly altruistic agents choose amounts of intergenerational transfers to their old parents and children as well as private savings. The government specifies amounts of public transfers from working adults to the dependents. The model also takes the effects of demographic transition on the burdens of supporting the elderly and children into account. Using 23 countries' data from the National Transfer Accounts (NTA ), we estimate the degrees of filial and parental altruism and adjust them for their respective life expectancy and fertility rates. The findings suggest that people in developing countries are more parentally altruistic than those in developed ones while the adjusted degree of filial altruism tends to be low in developing Asia. Our welfare analyses reveal that the developing Asian countries must introduce more comprehensive public welfare programs for the elderly to maximize social welfare. Moreover, their low adjusted degree of filial altruism may trap the developing Asian countries at the low levels of public old‐age support and social welfare as the further demographic transition ensues.     

WHY DO CHILDREN TAKE CARE OF THEIR ELDERLY PARENTS? ARE THE JAPANESE ANY DIFFERENT?

We conduct a theoretical and empirical analysis of why children live with (or near) their parents and provide care and assistance to them using microdata from a Japanese household survey, the Osaka University Preference Parameter Study. We find that the Japanese are more likely to live with (or near) their elderly parents and/or to provide care and attention to them if they expect to receive a bequest from them, which constitutes strong support for the strategic bequest motive, but that their caregiving behavior is also heavily influenced by the strength of their altruism toward their parents and social norms.     

Accounting for the Changing Role of Family Income in Determining College Entry

In this paper, I analyze the determinants of college enrolment and the changes in these determinants over time. I propose a quantitative life‐cycle model with college enrolment. Altruistic parents provide financial support to their children. Using counterfactual experiments, I find that 24 percent of all households are financially constrained in their college decision. Constraints become more severe over time. I show that my model is consistent with a narrow college enrolment gap between students from rich and poor families, as previously reported in the empirical literature. The estimation of enrolment gaps is a popular reduced‐form approach for measuring the fraction of constrained households. My results suggest that these reduced‐form estimates are misleading, and that a structural model of parental transfers is needed to correctly identify constrained households. Further, I show that parental transfers are an important driver behind the changing role of family income as a determinant of college entry, a fact that is well documented for the US economy.     

Economic growth and endogenous intergenerational altruism

The recent literature on the endogenous formation of preferences has emphasized that while some preferences are more conducive to growth than others, economic growth also contributes to the formation of particular tastes [Becker, Gary S. (1996): Accounting for Tastes, Cambridge, Ma.: Harvard University Press]. In this paper, we construct a neoclassical growth model where intergenerational altruism can be endogenously reinforced and entails costly sacrifices on the part of parents to acquire such trait. While the incentives to acquire altruistic traits depend on the economic conditions, in turn altruism determines the level of intergenerational bequests and ultimately the pace of capital accumulation and economic growth. It is shown that intergenerational transfers are driven by a natural degree of altruism at earlier stages of economic growth. Once individuals have satisfied their own physiological constraint in the course of economic development, they devote resources to shaping their altruistic preferences, increasing their social degree of altruism above its natural level. This in turn increases the share of intergenerational transfers and speeds up economic growth.     

Bequests,gifts, and education: links between intergenerational transfers

We study the channels parents use to make transfers to their children. First, we focus on the relationship between investments in education and property transfers. Second, we turn to how property transfers are divided between inter vivos gifts and bequests. We use a Swedish dataset that is superior to previously used data as it contains information on both gifts and inheritances received from parents. We estimate models for the probabilities of having university education, receiving gifts, and receiving inheritances. In addition, we estimate models for gift and inheritance amounts. We find that the more resources parents have, the higher the likelihood of transfers, and that the correlation between receiving inter vivos gifts and inheritances is very high. Finally, women are more likely to have university education and to receive gifts, and daughters receive gifts of larger amounts than sons, although there are no differences in terms of inheritance.     

Analyzing motives for money-transfers within families: the role of transfers for education

We present a theoretical framework to examine whether altruism or exchange is the motive for money-transfers within families. In our theoretical models, transfers for education are incorporated as an additional family transfer that is determined before money-transfers are decided. These models lead to testable implications about the relationship between transfers for education and money-transfers. Various econometric models are derived and estimated with PSID data on inter-vivos transfers and bequests. The empirical evidence is compatible with both altruism or exchange, but provides information about how these motivations work. The comparison between the empirical distribution of money-transfers and the distributions induced by our econometric models shows that these models are suitable.     

Self-enforcing exchange among generations: Implications for consumption and mobility

A three-generation OLG model with one-directional altruism and two-directional intra-family transfers is presented. Adults invest in their children's education and make transfers to their elderly parents. However, due to lack of altruism, adults with high earnings do not share consumption equally with their elderly parents but spend a larger share of their earnings on own consumption and on their children's education. This allows the model to be consistent with three empirical observations that are difficult to reconcile with traditional altruistic frameworks of intergenerational social interactions and mobility: (i) consumption is not perfectly shared between members of an extended family, (ii) consumption is not equally persistent over the lifecycle as across generations, and (iii) the intergenerational persistence of earnings is particularly high at the top end of the earnings distribution.     

Optimal contracting with altruism and reciprocity

Motivated by the recent experimental evidence on altruistic behavior, we study a simple principal–agent model where each player cares about other players' utility, and may reciprocate their attitude towards him. We show that, relative to the selfish benchmark, efficiency improves when players are altruistic. Nevertheless, in contrast to what may be expected, an increase in the degree of the agent's altruism as well as a more reciprocal behavior by players has ambiguous effects on efficiency. We also consider the effects of the presence of spiteful players and discuss how monetary transfers between players depend on their degrees of altruism and spitefulness.     

Pay-as-you-go Social Security and the Distribution of Altruistic Transfers

This paper studies the impact of an unfunded social security system on the distribution of altruistic transfers in a framework where savings are due to both life cycle and random altruistic motivations. We show that the effect of social security on the distribution of these transfers depends crucially on the strength of the bequest motive in explaining savings behaviour. We measure this strength by the expected weight that individuals attach to the utility of future generations. On the one hand, if the bequest motive is strong, then an increase in the social security tax raises the bequests left by altruistic parents. On the other hand, when the importance of altruism in motivating savings is sufficiently low, the increase in the social security tax could result in a reduction of the bequests left by altruistic parents under some conditions on the attitude of individuals toward risk and on the relative returns associated with private saving and social security. Some implications concerning the transitional effects of introducing an unfunded social security scheme are also discussed.     

Catching up? The educational mobility of migrants’ and natives’ children in Europe

Migrants into European countries are often less educated than European natives. We analyse whether migrants’ children are more or less likely than natives’ children to achieve upward educational mobility across generations, and study differences in the factors, which contribute to differences in mobility for the two groups. We find that migrants’ descendants are more often upwardly mobile (and less often downwardly mobile) than their native peers in the majority of countries studied, and show that the main factor contributing to these patterns is the education level of parents. Although a lower parental education means that their children are less likely to access the same amount of human, social and financial capital as children of more highly educated parents, migrants’ descendants over the last two generations were able to make significant progress in reducing education gaps with natives.     

Efficient Investment in Children

Many would say that children are society's most precious resource. So, how should we invest in them? To gain insight into this question, a dynamic general equilibrium model is developed where children differ by ability. Parents invest time and money in their offspring, depending on their altruism. This allows their children to grow up as more productive adults. First, the efficient allocation is characterized. Next, this is compared with the outcome that arises when financial markets are incomplete. The situation where child-care markets are also lacking is then examined. Additionally, the consequences of impure altruism are analyzed. Journal of Economic Literature Classification Numbers: D1, D31, D58, I2.     

How do middle-aged children allocate time and money transfers to their older parents in Europe?

This paper analyses the determinants of financial and time transfers from adult children to their older parents using the Survey of Health, Ageing and Retirement in Europe (SHARE). It is the first survey containing rich comparable interdisciplinary information about individuals aged 50+ from ten European countries (Austria, Denmark, France, Germany, Greece, Italy, the Netherlands, Spain, Sweden and Switzerland). The first part of the paper highlights the differences in the provision of upward private intergenerational transfers (in terms of both time and money) across the ten European countries. The second part describes the different determinants in the decision to provide time or money transfers to parents and evaluates whether these two types of assistance are substitutes or complements. Results highlight the existence of a substitution between time and money in relation to geographical distance and the existence of a weak substitution regarding the employment status of the middle-aged children.