Discussion Paper No. 556

ARE THE JAPANESE SELFISH,ALTRUISTIC, OR DYNASTIC?

Charles Yuji Horioka

October 2001

The Institute of Social and Economic Research
Osaka University
6-1 Mihogaoka, Ibaraki, Osaka 567-0047, Japan

ARE THE JAPANESE SELFISH, ALTRUISTIC, OR DYNASTIC?

Charles Yuji Horioka*
Institute of Social and Economic Research, Osaka University;
National Bureau of Economic Research, Inc.; andInstitute for Posts and Telecommunications Policy, Ministry of Public Management, Home
Affairs, and Posts and Telecommunications, Government of Japan
Telephone: 81-(0)6-6879-8586
Facsimile: 81-(0)6-6878-2766
E-mail: horioka@iser.osaka-u.ac.jp

October 18, 2001

ABSTRACTIn this paper, I analyze a variety of evidence for Japan and, where available, for the United States onbequest practices, on the importance and nature of bequest motives, on bequest division, on thewillingness of individuals to help others, etc., in order to shed light on which model of household behavior
applies in the two countries. My results suggest that the selfish life cycle model is the dominant model ofhousehold behavior in both countries but that it is far more applicable in Japan than it is in the U.S., thatthe dynasty model is also more applicable in Japan than it is in the U.S. but that it is not of dominant
importance even in Japan, and conversely, that the altruism model is far more applicable in the U.S. than it
is in Japan. (140 words)
Journal of Economic Literature Classification Numbers:
D12 (Consumer Economics: Empirical Analysis)
D64 (Altruism)
D91 (Intertemporal Consumer Choice; Life Cycle Models and Saving)E21 (Consumption; Saving)*This is the text of the 2001 JEA-Nakahara Prize Lecture, delivered at the fall meeting of the Japanese
Economic Association at Hitotsubashi University on 7-8 October 2001. I am indebted to Fumiaki Asano,
Takatoshi Ito, Yuko Kaneko, Miwa Kato, Nanae Machida, Kiminori Matsuyama, Colin McKenzie,
Masashi Nishikawa, Shigejiro Nishimaki, Yoshiyasu Ono, Keunkwan Ryu, Dariusz Stanko, Wako
Watanabe, Koji Yamashita, participants of the CIRJE/NBER/EIJS/CEPR Japan Project meeting, andespecially Fumio Ohtake, Midori Wakabayashi, Ken Yamada, and an anonymous referee for their helpfulcomments and assistance. The research for this paper was supported by Grant-in-Aid for Scientific
Research number 12124207 from the Ministry of Education, Culture, Sports, Science, and Technology of
the Japanese Government.
Forthcoming in Japanese Economic Review, vol. 53, no. 1 (March 2002).

1. Introduction
Together with firms and the government, individuals (households) are one of the three major
economic agents in any economy, but there is surprisingly little agreement about which model ofhousehold behavior applies in the real world. For example, are individuals selfish, caring only about
themselves, or are they altruistic, caring not only about themselves but also about their children, otherfamily members, and perhaps even about complete strangers? Or are individuals primarily concerned
about the perpetuation of the family line or the family business?
In this paper, I briefly discuss three theoretical models of household behavior and show that they
have very different implications for bequest motives and bequest division. I then present a variety ofevidence on bequest practices, on the strength and nature of bequest motives, on bequest division, on thewillingness of individuals to help others, etc., for Japan and, where available, for the United States in orderto shed light on which model of household behavior applies in the two countries.
The issue of which model of household behavior applies in the real world is an important one
because it has ramifications for what impact government policies have on the macroeconomy (e.g., forwhether or not Ricardian equivalence holds in the real world) and for the extent to which wealthdisparities are passed on from generation to generation.
The organization of this paper is as follows: In section 2, I discuss three theoretical models ofhousehold behavior with emphasis on their implications for bequest motives and bequest division; insection 3, I present historical evidence on bequest practices; in section 4, I describe the data sources usedin my analysis; in sections 5 through 8, I present and discuss various data on bequest motives and bequest
division; in section 9, I discuss data on individuals’ willingness to help others; in section 10, I discuss1

more formal tests; in section 11, I summarize my findings; and in section 12, I discuss the policy
implications of my findings.

2. Theoretical Considerations
There are at least three models of household behavior that are commonly used byeconomists—(1) the life cycle model, (2) the altruism model, and (3) the dynasty (or lineal) model—andthese models have very different implications for bequest motives and bequest division. In this section, I
discuss each of these models in turn with particular emphasis on their implications for bequest motives
and bequest division (see Laitner (1997) and Masson and Pestieau (1997) for a more detailed survey ofthis literature).

2.1. The Life Cycle Model
The life cycle model of Modigliani and Brumberg (1954) assumes that individuals are selfish
and that they derive utility only from their own consumption. Thus, in a static setting, the utility functionof parents will be as follows:

U p = U p (C p ),(1)

where U p = the utility of parents

C p = the consumption of parents,2and parents will maximize their utility subject to the following budget constraint:C p ≤ Yp ,(2)

where Y p = the income of parents.

Similarly, in a static setting, the utility function of children will be as follows:

U k = U k (C k ),(3)

where U k = the utility of children

C k = the consumption of children,and children will maximize their utility subject to the following budget constraint:C k ≤ Yk ,(4)

where Yk = the income of children.

In other words, parents and children will behave totally independently of one another.
In this simple form of the life cycle model, individuals will not leave any bequests at all to their3

children because they derive no utility from their children’s utility. However, at least three types ofbequests are consistent with more sophisticated versions of the life cycle model.
(1) Unintended, unplanned or accidental bequests arising from lifespan uncertainty.
Uncertainty about one’s lifespan can lead even selfish individuals to leave considerable bequests undercertain conditions, as shown by Levhari and Mirman (1977) and Davies (1981). If annuity markets are
perfect (i.e., actuarially fair annuities are available), individuals without a bequest motive will annuitize
their entire wealth and thus will not leave any bequests at all regardless of when they die. However, if
actuarially fair annuities are not available and individuals are risk averse and cannot force their children to
support them if and when they run out of assets (i.e., negative bequests are ruled out), lifespan uncertainty
will cause individuals to save more than they would in a world with no lifespan uncertainty and cause
those dying relatively young to leave considerable unintended, unplanned, or accidental bequests.
One variant of this type of bequest is unintended, unplanned, or accidental bequests arising fromsaving in preparation for uncertain medical and nursing care (long-term care) expenses in the future. If
actuarially fair medical and nursing care insurance is not available, individuals will save in preparation for
medical and nursing care expenses during old age, and if it turns out that they do not incur such expenses
or such expenses are not as high as expected, they will end up leaving considerable unintended, unplanned,
or accidental bequests (see Kotlikoff (1989) re saving for medical expenses).
(2) Bequests that are part of an implicit intra-family annuity contract. If actuarially fairannuities are not available on the open market, even selfish individuals may choose to insure against therisk of an uncertain lifespan by concluding an implicit annuity contract with their children whereby theirchildren agree to support them financially until they die in exchange for receiving a bequest when they die

4(Kotlikoff and Spivak, 1981).
One variant of this type of bequest is an intra-family “reverse mortgage” whereby the children
agree to support their parents financially until they die in exchange for inheriting the family home.
(3) Bequests that are a quid pro quo for care during old age (bequests arising from an
exchange motive). Even selfish individuals may conclude an agreement with their children whereby theirchildren agree to take care of them during old age in exchange for receiving a bequest when they die,where care encompasses everything from phone calls, visits, and companionship to housework, shopping,transportation, and nursing care. Individuals may choose to conclude such an agreement with theirchildren if such services are not available on the open market, if such services are available on the open
market but their prices are inflated, and/or if they prefer receiving such services from their children to
receiving them from complete strangers (see Cox (1987)).
One variant of this type of bequest is bequests motivated by the strategic bequest motive ofBernheim, Shleifer, and Summers (1985). In this model, individuals coerce their children into giving
them attention (visits, care, etc.) by threatening to disinherit them if they fail to do so.
Note that there is a quid pro quo in the case of bequests of types (2) and (3) (financial support
during old age in the case of (2) and care during old age in the case of (3)) and that individuals will notleave bequests of types (2) and (3) unless their children provide financial support and/or care during oldage. To put it another way, bequests of type (2) and (3) are ultimately used to finance one’s retirement
because they are, in effect, delayed compensation for financial support and/or care during old age, and net
bequests will not necessarily be positive because gross bequests from parents to children will be largely
offset by transfers in the other direction (viz., financial support and/or care during old age that children

5

provide to their parents). Note, moreover, that individuals will leave their entire bequest to the child who
provides the financial support and/or care in the case of bequests of types (2) and (3).

2.2. The Altruism Model1
The altruism model of Barro (1974) and Becker (1974, 1981, 1991) assumes that individuals
harbor intergenerational altruism toward their children and that they derive utility not only from their own
consumption but also from the utility of their children. Thus, in a static setting, the utility function ofparents will be as follows:

U p = U p (C p ,ψ [U k (C k )]),

(5)

where ψ = a positive monotonic transformation.2

Parents will typically give transfers (inter vivos transfers as well as bequests) to their children because
they harbor altruism toward them and derive utility from their utility.3 Thus, their budget constraint willbe:

C p + T ≤ Yp ,(6)

where T = transfers from parents to children,6and they will maximize their utility subject to this budget constraint.
If we further assume that children do not harbor intergenerational altruism toward their parents(i.e., that altruism is one-sided), their utility function will be as follows:

U k = U k (C k ) ,(7)and children will maximize their utility subject to the following budget constraint:C k ≤ Yk + T .

(8)

Barro (1974) and Becker (1974, 1981, 1991) show that, if children take their parents’ transfers as given,parents and children will act as if they are maximizing the parents’ utility function subject to the combined
budget constraint:

C p + C k ≤ Y p + Yk = Y T ,(9)where Y T = total family income.
This model implies that individuals will leave a bequest to their children regardless of whether
their children provide financial support to them and/or take care of them during old age, that bequests will
be divided among their children, and that bequests will be compensatory (i.e., that individuals will give
more to the child or children with less earnings capacity and/or greater consumption needs). Note,7however, that even altruistic parents will not necessarily leave a bequest to their children if their children’s
lifetime incomes are sufficiently greater than their own and/or if their degree of altruism is sufficiently
low.

2.3. The Dynasty (or Lineal) Model
The dynasty or lineal model of Chu (1991) assumes that individuals are motivated by a desire toperpetuate the family line and/or the family business and hence that they will behave so as to minimize theprobability of lineal or dynastic extinction. Thus, this model implies that individuals will leave a bequest
only if their children carry on the family line and/or the family business and that they will leave their entire
bequest to the child or children who carry on the family life and/or the family business.

As I have shown, the three models of household behavior discussed above have very different
implications concerning bequest motives and bequest division (see the summary in Table 1), and thus, data
on bequest motives and bequest division can shed light on which model of household behavior holds in thereal world. In section 3, I present historical evidence on bequest practices in Japan, while in sections 5-8,
I present contemporary data on bequest motives and bequest division in Japan and, where available, the U.
S. from a number of sources.

3. Historical Evidence on Bequest Practices
In this section, I present historical evidence on bequest practices in Japan. As the excellent
surveys of Aoyama et al. (1974) and Ohtake (1996) show, bequest practices in Japan have differed8

substantially over time, among social classes, and among regions. For example, dividing one’s bequest
among all of one’s children was common among all social classes during the early Tokugawa (Edo) period(1603-1868) but had been replaced by male primogeniture (the practice of leaving everything to the eldest
son and having him carry on the family line) by the middle of the Tokugawa period. Strict maleprimogeniture was observed by the samurai (warrior-bureaucrat) class but not by farmers andtownspeople (craftsmen and merchants), even after the middle of the Tokugawa period. For one thing,
only inherited assets (land, housing, and farmland) were bequeathed entirely to the eldest son, with other(acquired) assets being divided among all of one’s children, and moreover, if the eldest son did not havethe ability to farm (in the case of farmers) or to carry on the family business (in the case of townspeople),the second son, third son, or adopted son was designated as the heir.
Furthermore, in some regions, entirely different practices were followed. For example, insouthwestern Japan (especially southwestern Kyushu), male ultimogeniture or postremogeniture (masshi
souzoku), the practice of leaving more to the youngest son rather than the eldest son and having theyoungest son carry on the family line, was widespread. The youngest son would typically live with theparents until the end and would be rewarded by getting the largest share of the parents’ inheritance (albeit
not all of it). More precisely, the parents’ assets were divided equally among their sons except that the
youngest son received twice the share of the other sons or a bonus called tokushu zaisan (special assets).
Another practice also found in southwestern Japan was inkyo bunke (post-retirement branchfamily). Under this practice, when the eldest son got married, the parents and younger children would
cede the family home to him and his wife and move into a new home. When the second son got married,
the parents and younger children would cede the second family home to him and his wife and move into a9new home and so on until only the youngest son and the parents were left. The eldest son would typically
carry on the family line, but all of the sons would share equally in the care of the elderly parents, and either
the parents’ assets were divided equally or a disproportionate share was given to the eldest son.
One practice that was found in the Tohoku region was ane katoku souzoku (inheritance by theelder sister), also called shoseiji souzoku (inheritance by the first-born child). Under this practice, theeldest child (not the eldest son) was designated as the heir, carrying on the family line and inheriting all of
the parents’ assets. If the eldest child were a girl, she (the eldest son’s elder sister) would be designated as
the heir, hence the name ane katoku souzoku.4
The so-called Meiji Civil Code, which was promulgated in 1896-98, made male primogeniture
the rule for all social classes and made deviations from this rule illegal. As a result, practices notconsistent with male primogeniture such as male ultimogeniture and ane katoku souzoku declined rapidly
thereafter.
Finally, Japan’s civil code was drastically revised in 1947, with the ie system being abolishedand the division of bequests being changed from male primogeniture to equal division in principle (i.e.,
unless the individual leaves a will specifying otherwise).
With which models of household behavior are these practices consistent?5 The practice of maleprimogeniture (male ultimogeniture, ane katoku souzoku) is consistent with the dynasty model because
the eldest son (youngest son, eldest child) typically carries on the family line or the family business in
exchange for receiving the entire bequest (or the largest share thereof), but at the same time, it is also
consistent with the selfish life cycle model because it is typically the eldest son (youngest son, eldest
child) who lives with, and cares for, the aged parents in exchange for receiving the entire bequest (or the10

largest share thereof).
Similarly, the practice of designating as the heir the son most capable of carrying on the family
farm or the family business is clearly consistent with the dynasty model.
The practices of inkyo bunke is consistent with the dynasty model because the eldest son
typically carries on the family line in exchange for receiving a disproportionate share of the parents’bequest, but at the same time, it is also consistent with the selfish life cycle model because all sons shareequally in the care of their elderly parents and either the parents’ assets are divided equally among all of
their sons or each son gets at least something.
Finally, the division of parental assets among all of one’s children by all social classes during theearly Tokugawa period, the division of acquired assets among all of one’s children by farmers andtownspeople throughout the Tokugawa period, the practices of masshi souzoku and inkyo bunke, and thepostwar civil code are all consistent with the altruism model because they provide for equal division ofparental assets or for each child to get at least something.
Thus, prewar bequest practices have elements of all three models of household behavior but areperhaps most consistent with the dynasty model, while the postwar principle of equal division is consistent
with the altruism model. However, it should be noted that, even during the postwar period, many
individuals have chosen unequal division by leaving a will or by coming to an informal agreement with
their children and asking some of their children to “voluntarily” forfeit their inheritance rights (seeNoguchi, Uemura, and Kitou (1989)) and that this is consistent with either the selfish life cycle model,
altruism model, or dynasty model, depending on what criterion is used to divide the bequest.
Unfortunately, therefore, the historical evidence on bequest practices sheds little light on which model of11household behavior applies in Japan, and the only inference that can be drawn is that the dynasty model
was perhaps the most applicable model (but certainly not the only model) of household behavior from the
middle of the Tokugawa period until the Second World War. Fortunately, detailed data are available on
actual bequest behavior and attitudes towards bequests in contemporary Japan, and it is to these data that I
now turn.

4. Data Sources
In this section, I describe the three data sources used in the subsequent analysis.
(1) The Public Opinion Survey on Saving and Consumption. The first data source I used is
the Public Opinion Survey on Saving and Consumption (Chochiku to Shouhi ni kansuru Seron Chousa),
which until 1992 was called the Public Opinion Survey on Saving (Chochiku ni kansuru Seron Chousa).
This survey has been conducted every year since 1953 by the Central Council for Financial Information(Kin’yuu Kouhou Chuuou Iinkai), which was originally called the Central Council for Savings Promotion(Chochiku Zoukyou Chuuou Iinkai) and later renamed the Central Council for Savings Information(Chochiku Kouhou Chuuou Iinkai). Note, however, that only the 1989 and 1990 surveys containquestions about bequest motives. This survey (hereafter referred to as the POSSC) surveys 6,000
randomly selected households from throughout Japan and obtains about 4,100 to 4,300 responses. These
data are also analyzed by Ohtake and Horioka (1994, forthcoming).
(2) The Survey on the Financial Asset Choice of Households. The second data source I usedis the Survey on the Financial Asset Choice of Households (Kakei ni okeru Kin’yuu Shisan Sentaku ni
kansuru Chousa), which has been conducted every two years since 1988 by the Institute for Posts and12Telecommunications Policy (Yuusei Kenkyuu-sho) of the Ministry of Public Management, Home Affairs,
and

Posts

and

Telecommunications(Soumu-shou)(formerly

theMinistry

of

Posts

and

Telecommunications (Yuusei-shou)) of the Government of Japan. This survey (hereafter referred to as
SFACH) surveys 6,000 randomly selected households (5,010 in 2001) from throughout Japan and obtains
about 3,500 to 4,000 responses (about 3,100 in 2001).6 These data are also analyzed by Horioka et al.
(2001). I analyze the data from the 1988, 1990, 1992, 1994, 1996, 1998, and 2001 administrations of thissurvey.
(3) The Comparative Survey on Savings in Japan and the United States. The third data
source I used is the Comparative Survey on Savings in Japan and the United States (Chochiku ni kansuru
Nichibei Hikaku Chousa), which was conducted simultaneously in Japan and the U.S. in 1996 by theInstitute for Posts and Telecommunications Policy of what was then called the Ministry of Posts andTelecommunications of the Government of Japan. This survey (hereafter referred to as the Japan-U.S.
Survey) surveyed 1,800 households in both Japan and the U.S. using identical questionnaires and obtained
1,243 and 1,508 responses, respectively. These data are also analyzed by Horioka et al. (1998, 2000,
2001).
Note that all of the data pertaining to bequests in data sources (2) and (3) are inclusive of intervivos transfers but that it is not clear whether or not the data in data source (1) is inclusive of inter vivos
transfers.

5. Evidence on the Strength of Bequest Motives
In this section, I present data pertaining to the strength of people’s bequest motives in Japan and13the U.S. In subsection 5.1, I present data on the proportion of respondents who have received bequests
from their parents in the past, and in subsection 5.2, I present data on the proportion of respondents withplans to leave a bequest to their children.

5.1. Data on the Proportion of Respondents Who Have Received Bequests in the Past
In this subsection, I present data on the proportion of respondents who have received bequests
from their parents or parents-in-law in the past for Japan only (no data are available for the U.S.). For the
purposes of this analysis, I confine myself to respondents who are 60 years old or older because it is highly
likely that all of their parents and parents-in-law are already deceased. According to the SFACH(1990-1996), 34.74% to 40.19% of respondents aged 60 or older have ever received bequests from theirparents or parents-in-law (see Table 2).7

5.2. Data on the Proportion of Respondents with Plans to Leave a Bequest
In this subsection, I present data on the proportion of respondents who plan to leave a bequest inJapan and the U.S.8 Such data are available in all three of the surveys discussed above, but the wording of
the question differs from survey to survey. For example, “Do not plan to make any special efforts to leavea bequest to my/our child or children but will leave behind whatever happens to be left over” is not given
as one of the choices in the POSS and the 1992 SFACH, whereas it is given as one of the choices in the
1994, 1996, 1998, and 2001 SFACH and the Japan-U.S. Survey. Since the proportion of respondents
selecting this choice is approximately one-half or more in the surveys in which it is given as one of the
choices, the results will be severely biased if it is not given as one of the choices. I have therefore decided14

to focus on the surveys in which this choice is given as one of the choices, and if one does so, the results
for Japan are remarkably consistent, with about one-fourth of respondents planning to make an effort toleave a bequest (see Table 3). By contrast, a full 46% of Americans plan to make an effort to leave abequest. Thus, the proportion of respondents planning to make an effort to leave a bequest is nearly twice
as high in the U.S. as it is in Japan, but it is less than half even in the U.S. Thus, it appears that bequest
motives are weak in both the U.S. and Japan but especially weak in the case of Japan.
However, in order to determine which model of household behavior is more applicable in thereal world, it is more important to look at the nature of people’s bequest motives and on their attitudes
toward bequest division than it is to look at the strength of their bequest motives because, as shown insection 2, positive bequests are consistent with all three models of household behavior. Thus, it is to dataon the nature of people’s bequest motives and on their attitudes toward bequest division to which I turn inthe next two sections.

6. Evidence on the Nature of People’s Bequest Motives
In this section, I present data on the nature of people’s bequest motives in Japan and the U.S. In
subsection 6.1, I present data on the bequest motives of respondents’ parents, and in subsection 6.2, I
present data on the bequest motives of the respondents themselves.

6.1. Data on the Bequest Motives of Respondents’ Parents
I look first at data on the bequest motives of the parents of respondents for Japan only (no data
are available for the U.S.). The 1990 and 1992 SFACH collect data on whether respondents have received

15

bequests in the past and whether or not those bequests were conditional on taking care of their parents.
Thus, there are three categories of respondents—those receiving unconditional bequests, those receiving
conditional bequests, and those not receiving any bequests at all. The behavior of the parents of thosebelonging to the first category is consistent with the altruism model, while the behavior of the parents of
those belonging to the second and third categories is consistent with the life cycle model. The results forrespondents aged 60 or older are shown in Table 2 (I confined the sample to respondents aged 60 or older
because I wanted to focus on those whose parents are likely to have already passed away), and as this tableshows, the largest category is those not receiving bequests at all (59.81% in 1990 and 62.75% in 1992), thesecond largest category is those receiving conditional bequests (26.66% in 1990 and 18.77% in 1992), andthe smallest category is those receiving unconditional bequests (13.54% in 1990 and 18.47% in 1992).
Since the two largest categories are both consistent with the life cycle model, the share of respondents’parents whose behavior is consistent with the life cycle model was a full 86.46% in 1990% and 81.53% in
1992, and the proportion of parents whose behavior is consistent with the altruism model was only 13.54%
in 1990 and 18.47% in 1992.

6.2. Data on the Bequest Motives of Respondents
I look next at data on the nature of the bequest motives of respondents in Japan and the U.S. One
question in the SFACH and the Japan-U.S. Survey asks respondents which of the following six attitudes
toward bequests is closest to their own: (1) plan to leave a bequest to my/our child or children no matter
what, (2) plan to leave a bequest to my/our child or children only if my/our child or children take care ofme/us, (3) plan to leave a bequest to my/our child or children only if my/our child or children take over the16

family business, (4) do not plan to make any special efforts to leave a bequest to my/our child or children
but will leave behind whatever happens to be left over, (5) other, and (6) do not feel it is necessary to leavea bequest to my/our child or children under any circumstances. Unfortunately, choice (3) is not one of the
choices given in the case of the 1992 and 1994 SFACH and the Japan-U.S. Survey, choice (4) is not one
the choices given in the case of the 1992 SFACH, and choice (5) is not one of the choices given in the caseof the Japan-U.S. Survey. The POSSC also includes a question about the nature of the bequest motives of
respondents, but the choices are much more limited: the only choices given are choices (1), (2), and (6)above except that choice (6) is broken down into (6a) do not plan to leave a bequest to my/our child orchildren because I/we want to enjoy my/our own lives and (6b) do not plan to leave a bequest to my/ourchild or children because the expectation of receiving a bequest from me/us might cause my/our child orchildren to lose the will to work. Choices (1) and (6b) are consistent with the altruism model, choices (2),(4), and (6a) are consistent with the life cycle model, choice (3) is consistent with the dynasty model, and
it is not clear with which model choice (5) is consistent.
Since the proportion of respondents selecting choice (4) is approximately one-half or more in thesurveys in which it is given as one of the choices, the results will be severely biased if it is not given as oneof the choices. I have therefore decided to focus on the surveys in which choice (4) is given as one of the
choices (the 1994, 1996, 1998, and 2001 SFACH and the Japan-U.S. Survey).
The results are shown in Table 4, and looking first at the results based on the SFACH(1994-2001), “do not plan to make any special efforts to leave a bequest to my/our child or children but
will leave behind whatever happens to be left over” and “do not feel it is necessary to leave a bequest to
my/our child or children under any circumstances,” both of which are consistent with the life cycle

17model,9 are by far the dominant attitudes toward bequests, with a full 46.06 to 49.75% and 24.16 to
27.33%, respectively, of respondents holding these views. “Plan to leave a bequest to my/our child orchildren no matter what,” which is consistent with the altruism model, is in third place, with 17.14 to
19.89% of respondents holding this view. “Plan to leave a bequest to my/our child or children only if
my/our child or children take care of me/us,” which is consistent with the life cycle model, and “plan toleave a bequest to my/our child or children only if my/our child or children take over the family business,”which is consistent with the dynasty model, are in distant fourth and fifth place, respectively, with a mere
4.94 to 6.80% and 1.30 to 1.57%, respectively, of respondents holding these views.
Looking next at the proportion of respondents whose views are consistent with each model ofhousehold behavior, an overwhelming proportion (77.23 to 81.11%) of respondents hold a view that is
consistent with the life cycle model, only 17.14 to 19.89% hold a view that is consistent with the altruism
model, and a mere 1.30 to 1.57% hold a view that is consistent with the dynasty model.
Turning to the results from the Japan-U.S. Survey, these results are not strictly comparable tothose from the SFACH because the wording of the question about bequest motives is somewhat different
with the biggest difference being that the no bequest option is “do not feel it is necessary to leave a bequest
to my/our child or children under any circumstances” in the SFACH but is “do not plan to leave a bequest
to my/our child or children under any circumstances” in the Japan-U.S. Survey (italics added). Since there
are many who leave a bequest even though they do not feel it is necessary to do so, the proportion of
respondents choosing the no bequest option is much higher (and the proportion of respondents choosing
the option “do not plan to make any special efforts to leave a bequest to my/our child or children but will
leave behind whatever happens to be left over” is much lower) in the case of the Japan-U.S. Survey.

18Moreover, there are other differences as well—for example, “plan to leave a bequest to my/our child orchildren only if my/our child or children take over the family business” and “other” are among the choicesin the case of the SFACH but not in the case of the Japan-U.S. Survey.
If these differences are taken into account, the results for Japan from the Japan-U.S. Survey arebroadly consistent with the results from the SFACH: “do not plan to make any special efforts to leave abequest to my/our child or children but will leave behind whatever happens to be left over” which isconsistent with the life cycle model, is by far the most dominant view, with 69.33% of respondents holding
this view, “plan to leave a bequest to my/our child or children no matter what,” which is consistent withthe altruism model, is number two, with 19.28% of respondents holding this view, and “plan to leave abequest to my/our child/children only if my/our child or children take care of me/us” and “do not plan toleave a bequest to my/our child or children under any circumstances,” both of which are consistent withthe life cycle model, are a distant third and fourth, respectively, with 6.39% and 5.00%, respectively, of
respondents holding these views. (No information is available on the proportion of respondents who “planto leave a bequest to my/our child or children only if my/our child or children take over the familybusiness.”) Thus, 80.72% of respondents have a bequest motive that is consistent with the life cycle
model and 19.28% a bequest motive that is consistent with the altruism model, and these figures are
remarkably consistent with the figures from the SFACH.
Looking finally at the U.S. results from the Japan-U.S. Survey, “do not plan to make any special
efforts to leave a bequest to my/our child or children but will leave behind whatever happens to be left
over,” which is consistent with the life cycle model, is number one, as in the case of the Japanese results,
but the proportion of respondents holding this view is much lower than in the case of the Japanese results19

(51.13% vs. 69.33%). “Plan to leave a bequest to my/our child or children no matter what,” which isconsistent with the altruism model, is number two, as in the case of the Japanese results, but the proportionof respondents holding this view is more than twice as high as in the case of the Japanese results (42.53%
vs. 19.28%). Finally, “plan to leave a bequest to my/our child/children only if my/our child or children
take care of me/us” and “do not plan to leave a bequest to my/our child or children under any
circumstances,” both of which are consistent with the life cycle model, are a distant third and fourth,respectively, as in the case of the Japanese results, but the proportion of respondents holding these views
are quite a bit lower than in the case of the Japanese results (3.40% vs. 6.39% and 2.93% vs. 5.00%,
respectively).
As a result, the proportion of respondents who have a bequest motive that is consistent with thelife cycle model is much lower in the U.S. than in Japan (57.47% vs. 80.72%), whereas the proportion of
respondents who have a bequest motive that is consistent with the altruism model is more than twice ashigh in the U.S. than it is in Japan (42.53% vs. 19.28%).
Thus, the majority of respondents in both countries have bequest motives that are consistent withthe life cycle model, but this proportion is much higher in Japan than it is in the U.S. Conversely, theproportion of respondents with a bequest motive that is consistent with the altruism model is more than
twice as high in the U.S. as it is in Japan.

7. Evidence on Bequest Division
In this section, I present data on bequest division in Japan and the U.S. In subsection 7.1, I
present data on the division of the respondents’ parents’ and parents-in-law’s bequests, and in subsection20

7.2, I present data on the respondents’ attitudes toward the division of their own bequest.

7.1. Data on the Division of Respondents’ Parents’ and Parents-in-Law’s Bequests
In this subsection, I present data on the division of respondents’ parents’ and parents-in-law’s
bequests for Japan only (no data are available for the U.S.). In the 1998 and 2001 SFACH, respondents are
asked how their parents’ and parents-in-law’s bequests were divided with the choices being: (1) divided
equally, (2) more or all to the child or children who took care of the parents, (3) more or all to the child orchildren who took over the family business, (4) more or all to the child or children who had less income,(5) more or all to the eldest son/daughter even though he/she did not take care of the parents, and (6) other.
Method (2) is consistent with the life cycle model, methods (3) and (5) with the dynasty model, andmethod (4) with the altruism model. Method (1) is not, in general, consistent with any model of householdbehavior, but it is consistent with the altruism model if we assume that the earnings capacity relative toconsumption needs of all of one’s children are roughly equal.
The results are shown in Table 5, and as can be seen from this table, “divided equally,” which ismost consistent with the altruism model, is the dominant method of bequest division in three out of fourcases (and second in one case), with 28.04 to 37.43% of parents and parents-in-law dividing their bequests
in this way. “More or all to the child or children who took care of the parents,” which is consistent with thelife cycle model, is a relatively close second in three out of four cases (and first in one case), with 24.27 to
32.43% of parents and parents-in-law dividing their bequests in this way. The ranking of the othermethods of bequest division differs somewhat between years, with “no bequests left” ranking third in
1998, with 13.60 to 14.91% of parents and parents-in-law not leaving a bequest, followed by “more or all21

to the child or children who took over the family business” in fourth place (6.73 to 9.39%), “more or all tothe eldest son/daughter even though the eldest son/daughter did not take care of the parents” in fifth place(4.68 to 5.94%), and “more or all to the child or children who had less income” in sixth place (0.38 to
1.75%). In 2001, “more or all to the child or children who took over the family business” ranked third
with 12.20 to 13.85% of parents and parents-in-law dividing their bequests in this way, followed by “moreor all to the eldest son/daughter even though the eldest son/daughter did not take care of the parents” infourth place (9.06 to 10.64%), “no bequests left” in fifth place (2.87 to 8.36%), and “more or all to thechild or children who had less income” in sixth place (0.00 to 0.51%).
Looking next at the proportion of respondents whose parents’ and parents-in-law’s method ofbequest division is consistent with each model of household behavior, the life cycle model is the dominantmodel in all cases (but tied for first in one case), with the method of bequest division of 33.45 to 40.04% ofparents and parents-in-law being consistent with the life cycle model, followed by the altruism model insecond place (28.55 to 39.18%) and the dynasty model in third place (11.40 to 24.49%).

7.2. Data on Respondents’ Attitudes toward Bequest Division
In this subsection, I present data on the attitudes of respondents toward the division of theirbequests in Japan and the U.S.10 In the surveys I used in this analysis, respondents are asked if they feel itis necessary to leave a bequest to their child or children and those who feel that it is necessary to leave abequest to their child or children are asked which of six attitudes toward bequest division is closest to theirown: (1) divide equally, (2) give more or all to the child or children who take care of me/us, (3) give moreor all to the child or children who take over the family business, (4) give more or all to the child or children

22who has less income, (5) give more or all to the eldest son/daughter even if he/she does not take care ofme/us, and (6) other. (These six attitudes coincide almost exactly with the six methods of bequest division
given in the question regarding the division of the parents’ and parents-in-law’s bequests.)
Note that the wording of the question about attitudes toward bequest division is problematic in
the case of the 1994 SFACH. In this year, attitude (5) is worded “give more or all to the eldest
son/daughter,” and the qualification “even if he/she does not take care of me/us” is omitted. Thus,
respondents who want to give more or all to their eldest son/daughter because he/she took care of themwould not be sure whether to pick attitude (2) or attitude (5), and for this reason, the proportion of
respondents selecting attitude (5) is more than twice as high in 1994 as it is in later years. Since the resultsfor 1994 are neither reliable nor comparable to the results for later years, I will focus primarily on the
results for 1996 and later.
The results are shown in Table 6, and looking first at the results from the SFACH, “divide
equally,” which is most consistent with the altruism model, is the dominant attitude toward bequest
division in all years, with 36.15 to 42.75% of respondents holding this view. “I/we do not feel it isnecessary to leave a bequest to my/our child or children under any circumstances” and “give more or all tothe child or children who take care of me/us,” both of which are consistent with the life cycle model, are insecond and third place, respectively, with 24.16 to 27.33% and 21.12 to 24.10%, respectively, of
respondents holding these views. “Give more or all to the eldest son/daughter even if the eldest
son/daughter does not take care of me/us” and “give more or all to the child or children who take over thefamily business,” both of which are consistent with the dynasty model, are in distant fourth and fifth place,respectively, with 3.46 to 6.30% and 2.62 to 3.66%, respectively, of respondents holding these views.

23

Finally, “give more or all to the child or children who has less income,” which is consistent with thealtruism model, is in last place with a mere 0.70 to 0.93% of respondents holding this view.
Looking next at the proportion of respondents whose attitude toward bequest division isconsistent with each model of household behavior, the attitude toward bequest division of 46.83 to 48.46%
of respondents is consistent with the life cycle model, that of 36.89 to 43.45% of respondents is consistent
with the altruism model, and that of 6.07 to 9.77% of respondents is consistent with the dynasty model.
Thus, the rank order of the various models of household behavior is the same as in the case of the results
based on bequest motives, with the life cycle model first, the altruism model second, and the dynasty
model third, but the proportion of respondents whose attitude toward bequest division is consistent withthe life cycle and dynasty models is much lower and the proportion of households whose attitude toward
bequest division is consistent with the altruism model is much higher than in the case of the results basedon bequest motives.
Turning to the results for Japan from the Japan-U.S. Survey, the results are not strictly
comparable to those from the SFACH for the reasons given earlier, but if these differences are taken into
account, the results are broadly consistent. “Divide equally,” which is most consistent with the altruism
model, is again the dominant attitude toward bequest division, with 44.17% of respondents holding thisview, but “I/we do not feel it is necessary to leave a bequest to my/our child or children under any
circumstances,” which is consistent with the life cycle model, falls from second to fifth place, presumably
because of the difference in wording noted earlier, with only 5.00% of respondents holding this view.
“Give more or all to the child or children who take care of me/us,” which is also consistent with the life
cycle model, rises from third to second place, with 29.21% of respondents holding this view, and “give24more or all to the eldest son/daughter even if the eldest son/daughter does not take care of me/us” and“give more or all to the child or children who take over the family business,” both of which are consistent
with the dynasty model, rise from fourth to third and fifth to fourth place, respectively, with 7.71% and5.73%, respectively, of respondents holding these views. Finally, “give more or all to the child or children
who has less income,” which is consistent with the altruism model, remains in last place with a mere
1.75% of respondents holding this view. As a result, the altruism model is now the dominant model ofhousehold behavior in Japan, with the proportion of respondents whose attitude toward bequest division isconsistent with the altruism model increasing to a full 45.92%. By contrast, the life cycle model falls
from first place to second place, with the proportion of respondents whose attitude toward bequest
division is consistent with the life cycle model falling to only 34.21%, and the dynasty model remains inthird place, with the proportion of respondents whose attitude toward bequest division is consistent withthe dynasty model being a mere 13.44%.
Turning finally to the U.S. results from the Japan-U.S. Survey, “divide equally,” which is mostconsistent with the altruism model, is the dominant attitude toward bequest division, as in the case of theJapanese results, but the proportion of respondents holding this view is nearly twice as high in the U.S. as
it is in Japan (84.10% vs. 44.17%).11 12 Conversely, the other five attitudes toward bequest division are allof only negligible importance in the U.S.: no more than 3.09% of respondents hold any of these views andthe proportion of respondents holding each of these views is lower in the U.S. than it is in Japan, with thegap being especially large in the case of “give more or all to the child or children who take care of me/us”(3.09% vs. 29.21%). As a result, the altruism model is by far the most dominant model of householdbehavior in the U.S. with 84.51% of respondents having an attitude toward bequest division that is25

consistent with the altruism model; this proportion is almost twice as high as the corresponding proportion
for Japan. Conversely, only 6.02% of U.S. respondents have an attitude toward bequest division that is
consistent with the life cycle model (a proportion that is less than one-fifth of the corresponding
proportion for Japan), and the proportion of respondents whose attitude toward bequest division isconsistent with the dynasty model is also far lower in the U.S. than it is in Japan (2.57% vs. 13.44%).

8. Summary of Findings regarding Bequest Motives and Bequest Division
Finally, I summarize my findings regarding bequest motives and bequest division in Table 7.
Looking first at the results for the life cycle model for Japan, the results regarding bequest motives (thoseof the parents of respondents as well as those of the respondents themselves) suggest that the behavior of
77.23 to 91.53% of individuals is consistent with the life cycle model, while the results regarding bequest
division (that of the parents of respondents as well as that of the respondents themselves) suggest that the
behavior of 33.45 to 48.46% of individuals is consistent with the life cycle model. Turning to the results
for the U.S., the results regarding the bequest motives of respondents suggest that the behavior of 57.47%
of individuals is consistent with the life cycle model, while the results regarding attitudes toward bequest
division suggest that the behavior of only 6.02% of individuals is consistent with the life cycle model.
Looking next at the results for the altruism model for Japan, the results regarding bequest
motives suggest that the behavior of 13.54 to 19.89% of individuals is consistent with the altruism model,
while the results regarding the attitudes toward bequest division of respondents suggest that the behaviorof 28.55 to 45.92% of individuals is consistent with the altruism model. Turning to the results for the U.S.,
the results regarding the bequest motives of respondents suggest that the behavior of 42.53% of26

individuals is consistent with the altruism model, while the results regarding attitudes toward bequest
division suggest that the behavior of a full 84.51% of individuals is consistent with the altruism model.
Looking finally at the results for the dynasty model for Japan, the results regarding the bequest
motives of respondents suggest that the behavior of 1.30 to 1.57% of individuals is consistent with thedynasty model, and the results regarding the attitudes toward bequest division of respondents suggest thatthe behavior of 6.07 to 24.49% of individuals is consistent with the dynasty model. Turning to the results
for the U.S., the results regarding attitudes toward bequest division suggest that the behavior of only
2.57% of individuals is consistent with the dynasty model.
Thus, the exact proportions of individuals whose behavior is consistent with each model ofhousehold behavior are quite different depending on the criterion used, but the results are broadly
consistent in suggesting that the life cycle model is the dominant model of household behavior in Japanand that it is far more applicable in Japan than it is in the U.S., that the dynasty model is also more
applicable in Japan than it is in the U.S. but that it is not of dominant importance even in Japan, andconversely, that the altruism model is far more applicable in the U.S. than it is in Japan.

The only

exception is that the results based on attitudes toward bequest division suggest that the behavior of only aminority of individuals is consistent with the life cycle model, but the proportion of individuals whose
behavior is consistent with the life cycle model is likely to be an underestimate because “divide equally” isnot, strictly speaking, consistent with the altruism model.

9. Evidence on Respondents’ Willingness to Help Others
The last type of evidence I wish to consider is data on the willingness of respondents to give27

financial assistance to others for Japan only (no data are available for the U.S.). The 1998 and 2001
SFACH include the following question “Would you be willing to give financial assistance to the following
categories of individuals if they were temporarily short of cash? Please assume that the money will neverbe repaid,” and the categories given are “your own parents,” “your spouse’s parents,” “your children,”“your brothers and sisters,” “friends,” “acquaintances,” “disaster victims,” and “complete strangers”(except that not all choices are given in both years). Assuming that there is no quid pro quo for thefinancial assistance given, those answering “yes” to this question can be regarded as harboring altruistic
feelings toward the category of individuals in question, and thus data of this type can be used to test
whether the altruism model applies in the real world. In particular, if the parental altruism model
described in section 2 applies, respondents should reply that they are willing to give financial assistance totheir own children but not to anyone else. If the life cycle model applies, respondents should not be
willing to give financial assistance to anyone, and if the dynasty model applies, respondents should be
willing to give financial assistance only to the child who carries on the family line and/or the familybusiness. Note, however, that if there is a quid pro quo for the financial assistance given (for example, thefinancial assistance is conditional on the recipient giving financial assistance to the donor if and when thedonor faces financial difficulty (a risk-sharing agreement à la Cochrane (1991), Mace (1991), andTownsend (1994)), the willingness to give financial assistance to any and all categories of people is fully
consistent with all three models of household behavior including the selfish life cycle model and is notnecessarily evidence of altruism.
The results are shown in Table 8, and if we temporarily ignore the possibility of risk sharing, thistable suggests that respondents are most altruistic toward their own children, with 91.59 to 91.86% of28

respondents being willing to give financial assistance to their own children. Somewhat surprisingly,
respondents are almost as altruistic toward their own parents and their spouse’s parents as they are toward
their own children, with 86.37 to 88.62% of respondents being willing to give financial assistance to theirown parents and 84.38 to 84.83% being willing to give financial assistance to their spouse’s parents.
Respondents are also fairly altruistic toward siblings and disaster victims, with 60.30 to 61.59% of the
respondents being willing to give financial assistance to siblings and 49.34% of respondents being willingto give financial assistance to disaster victims. By contrast, respondents are not very altruistic toward
friends, acquaintances, and complete strangers, with only 19.43%, 11.24%. and 1.56% of respondents
being willing to give financial assistance to friends, acquaintances, and complete strangers, respectively.
These results appear to contradict the earlier results regarding bequest motives and bequest
division and suggest that the altruism model applies to a far greater proportion of individuals thansuggested by the earlier results. Moreover, the fact that individuals are almost as altruistic toward theirown parents as they are toward their own children suggests that a reciprocal (two-sided) altruism model ismore applicable than the parental (one-sided) altruism model described in section 2. Furthermore,individuals appear to harbor altruism not only toward their own children and parents but also toward theirsiblings and disaster victims. The fact that individuals are far more likely to help disaster victims thanfriends, acquaintances, and complete strangers suggests that they are motivated more by risk sharing (orreciprocal altruism) considerations than by purely altruistic considerations.13 Indeed, their willingness tohelp family members could also be motivated by risk sharing considerations rather than by pure altruism.
Thus, perhaps the results in this section are not as strongly supportive of altruism and not as inconsistent
with the earlier results regarding bequest motives and bequest division as it appears at first glance.

29

10. More Formal Tests
Next, I would like to briefly survey a number of more formal tests of the applicability of various
models of household behavior.

10.1. Analyses of the Impact of Parental Bequest Motives and Parental Assets on the
Behavior of Children
A number of papers have examined whether there is a link between parental bequest motives orthe amount of parental assets and the amount of financial support and/or care parents receive from theirchildren. If parents are altruistic or dynastic, they should leave bequests to their children regardless ofwhether or not their children provide financial support and/or care to them, and similarly, if children are
altruistic, they should provide financial support and/or care to their parents regardless of whether or notthey expect to receive bequests or inter vivos transfers from their parents and should be more likely toprovide financial support and/or care to their parents the less wealthy their parents are. Thus, there should
be no correlation between parental bequest motives and the amount of financial support and/or careparents receive from their children, and there should be a negative correlation between parental assets andthe amount of financial support and/or care parents receive from their children. By contrast, if parents are
selfish, they will make bequests conditional on receiving financial support and/or care from their children,and similarly, if children are selfish, they will be more likely to provide financial support and/or care to
their parents if they expect to receive bequests or inter vivos transfers from their parents (especially if suchtransfers are conditional on providing financial support and/or care to their parents) or if the amount ofsuch transfers is large. Thus, there should be a positive correlation between parental bequest motives and30

the amount of financial support and/or care parents receive from their children as well as between parental
assets (a proxy for the amount of bequests and inter vivos transfers) and the amount of financial support
and/or care parents receive from their children.
Turning to the empirical findings for Japan, Horioka et al. (1998, 2000, 2001) find that parents
with bequest motives are more likely to live with their children and more likely to receive financial
support and/or care from their children than are parents without bequest motives. Similarly, Noguchi,
Uemura, and Kitou (1989) find that children who live with their parents are much more likely to receive abequest that those who live apart from their parents (63.3% vs. 20.5%) and that the probability ofreceiving a bequest increases sharply with the amount of financial support provided (from 29.2% in thecase of a small amount of support to 66.7% in the case of a large amount of support).
Komamura (1994) and Ohtake and Horioka (1994, forthcoming) find that the housing assets ofparents increase the likelihood of their children living with them, and Ohtake and Horioka (1994,
forthcoming) also find that the financial net worth of parents increases the amount of financial support
they receive from their children (given that they receive support).14 If we regard coresidence as a proxyfor care, all of these findings are consistent with the selfish life cycle model and inconsistent with thealtruism and dynasty models.

10.2. Analyses of the Impact of Public Pensions on Consumption/Saving
Takayama et al. (1990) is the most careful analysis of the impact of public pensions on the
consumption/saving of pre-retirement individuals. If the selfish life cycle model or the dynasty modelholds, an increase in public pension benefits will reduce household saving because the two are substitute31

sources of retirement income, but if the altruism model holds, public pension benefits (or, more precisely,
the portion that represents a net transfer from younger generations) will not affect household saving
because the reduction in retirement saving caused by an increase in public pension benefits will be
precisely offset by the increased saving needed to compensate future generations for bearing the burden of
the higher level of the current generation’s public pension benefits. Looking at the results, Takayama et al.
(1990) find that public pension wealth has a positive and significant impact on the consumption of
pre-retirement households, which supports the selfish life cycle model, but that when they break public
pension wealth down into the part attributable to the current generation’s own public pension
contributions and the part that represents a net transfer from younger generations, the results areinconclusive, with the impact of net transfers being estimated to be negative in some cases and positive inothers. Thus, the results are somewhat inconclusive results but provide some support for the selfish life
cycle model.15

10.3. Analyses of the Impact of the Distribution of Resources within Extended Families on
Their Consumption Patterns
Hayashi (1995) examines whether the distribution of resources within Japanese extended
families affects their consumption patterns using micro data from the 1979 and 1984 National Survey of
Family Income and Expenditure (Zenkoku Shouhi Jittai Chousa), which was conducted by what was thencalled the Statistics Bureau of the Management and Coordination Agency (Soumu-chou Toukei-kyoku) of
the Japanese Government. If the altruism model applies, the distribution of resources within extended
families should not affect their consumption patterns (the so-called neutrality property), but Hayashi finds

32that the higher is the parents’ share of household income, the greater is the household’s expenditure on
food items preferred by the parents. This finding suggests that the altruism model does not apply in thecase of Japan although Hayashi does not rule out the presence of a less extreme form of altruism between
Japanese parents and children.

10.4. Analyses of the Impact of Tax Policy on Consumer Spending
Watanabe, Watanabe, and Watanabe (2001) analyze the impact of tax policy on consumer
spending in Japan and find that tax changes (especially permanent changes) have a significant effect on
consumer spending and that the null hypothesis that the fraction of Ricardian (altruistic) consumers is zerocannot be rejected.

10.5. Analyses of Inter-cohort Differences in Lifetime Incomes
If individuals are altruistic, lifetime incomes should be equalized across cohorts, but Saito(forthcoming) finds that there are large differences in lifetime incomes across cohorts in both the U.S. andJapan, which leads him to conclude that individuals in neither country are altruistic.

10.6. Summary
The results from at least four of the five types of tests are consistent with the selfish life cycle
model and inconsistent with the altruism model, and there is virtually no evidence in favor of the altruism
model. Thus, the results of the more formal tests are generally consistent with most of the foregoingsurvey evidence.

33

11. Conclusions
What conclusions can be reached from these diverse and sometimes contradictory findings?
One thing that can be said for sure is that no model of household behavior has universal applicability ineither Japan or the U.S. The various models of household behavior appear to coexist in both countries andperhaps even within the same individual. Nonetheless, it appears that the selfish life cycle model is themost highly applicable model in both Japan and the U.S. but that it applies to a far greater extent in Japan
than it does in the U.S., that the dynasty model is also more applicable in Japan than it is in the U.S. butthat it is not of dominant importance even in Japan, and conversely, that the altruism model is far more
applicable in the U.S. than it is in Japan. Those who believe that the Japanese are more altruistic thanother peoples (such as Hayashi (1986)) appear to be mistaken.

12. Policy Implications
Last but not least, I discuss the policy implications of my findings. As discussed in greater detailby Barro (1974), Weil (1989), Masson and Pestieau (1997), and others, the policy implications of the threemodels of household behavior analyzed in this paper vary dramatically, with very different implications
concerning (1) the effects of fiscal policy and (2) the effects of bequests on intra-family and social
inequality. In this section, I discuss each of these in turn.

12.1. The Effects of Fiscal Policy
In the case of the life cycle and dynasty models, a tax cut that is financed by the issuance oflong-term government bonds will have a positive impact on current consumption because the current
generation will not care about the tax increase the government will have to impose on future generations in34

order to redeem its bonds.16 In the case of the altruism model, by contrast, a tax cut that is financed by theissuance of long-term government bonds will have no impact on current consumption because the current
generation will save the entire tax cut and use it to increase its bequest to future generations in order tocompensate them for the increased tax burden they will have to bear (usually referred to as Ricardianequivalence). Thus, Ricardian equivalence will hold in the case of the altruism model but not in the caseof the life cycle and dynasty models.17
Similarly, the impact on household saving of raising the benefit levels of a pay-as-you-go public
pension system will be very different depending on whether the selfish life cycle model, the altruism
model, or the dynasty model applies, as discussed in subsection 10.3 above.

12.2. The Effects of Bequests on Intra-family and Social Inequality
According to the selfish life cycle model, individuals either do not leave bequests, leave only
unintended bequests, or leave only bequests that are a quid pro quo for financial support and/or care during
old age. In the latter case, the value of the bequest will presumably roughly coincide with the value of thefinancial support and/or care during old age and thus net bequests (gross bequests net of intergenerationaltransfers in the opposite direction) will be roughly zero. Thus, in the case of the selfish life cycle model,bequests will not exacerbate or perpetuate wealth disparities.
By contrast, in the case of the altruism and dynasty models, bequests will be unrequited and thus
even net bequests will be positive. In the case of the altruism model, bequests will equalize the
distribution of wealth among siblings because they are compensatory, but at the same time, they will
exacerbate and perpetuate social (inter-family) wealth disparities. In the case of the dynasty model, by

35

contrast, bequests will cause the distribution of wealth among siblings to become more unequal because
the entire bequest goes to the child who carries on the family line and/or the family business, but they may,at the same time, reduce steady-state social inequality by facilitating the upward mobility of the child who
receives the entire bequest (see Chu (1991)).

12.3. Summary
To the extent that the Japanese adhere to the selfish life cycle model, a tax cut that is financed by
the issuance of long-term government bonds will have a positive impact on current consumption, an
increase in public pension benefits will cause a decline in household saving, and bequests will not cause
wealth inequalities to be passed on from generation to generation. However, these implications need to bemoderated to the extent that a sizable minority of the Japanese adhere to the altruism model.

References
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Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, vol. 82, no. 5(December), pp. 1177-1198.
Andreoni, James (1989), “Giving with Impure Altruism: Applications to Charity and Ricardian
Equivalence,” Journal of Political Economy, vol. 97, no. 6 (December), pp. 1447-1458.
Aoyama, Michio, et al. (1974), Kouza Kazoku (A Course on the Family), vol. 5: Souzoku to Keishou(Inheritance and Succession) (Tokyo: Koubundou) (in Japanese).
Barro, Robert J. (1974), "Are Government Bonds Net Wealth?" Journal of Political Economy, vol. 82, no.
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41

Table 1: Summary of the Three Models of Household Behavior
ModelLife Cycle Model

Assumption
Individuals are selfish

Altruism Model

Individuals harbor intergenerational altruism toward
their children

Dynasty (orLineal) Model

Individuals care about theperpetuation of the familyline or the family business

Bequest Motives
Leave no bequest, leave
only unintended bequests, orleave bequest only if children
provide financial support
and/or care during old age
Leave unconditional bequest(or no bequest)

Bequest Division
Leave all to the child who
provides financial support
or care during old age

Divide one's bequest among
one's children and, inparticular, leave more to thechild who has less earning
power or greater needs
Leave bequest only if children Leave all to the child whocarry on the family line or
carries on the family line or
the family businessthe family business

Table 2: The Strength and Nature of the Respondents' Parents' Bequest Motive
Year

1990
1992
1994
1996

(1)
Received
Bequest
40.19
37.25
34.74
39.61

(2)
Unconditional
13.54
18.47
-

(3)
(4)
Life Cycle Altruism
Number ofConditional Didn't Receive
Model
Model
Observations
on CareBequest(3)+(4)
(2)
26.66
59.81
86.46
13.54
622
18.77
62.75
81.53
18.47
698
65.26
898
60.39
982

Source: SFACH

42

Table 3: The Strength of the Respondents' Bequest Motive
Survey,Year, andCountry

IntendedBequests

Unintended
Bequests

Intended or Unintended Bequests

No
Bequests

Public Opinion Survey on Saving
1989
52.75
1990
54.22
-

52.75
54.22

33.70
32.61

13.56
13.17

4146
3379

Survey on the Financial Asset Choice of Households
1992
51.98
1994
23.94
49.75
1996
25.78
47.49
1998
26.19
47.31
2001
24.12
46.06

51.98
73.69
73.27
73.50
70.18

40.79
24.55
24.16
24.92
27.33

7.23
1.75
2.56
1.58
2.49

3788
3763
3588
3158
3055

-

1001
1058

Comparative Survey of Savings in Japan and the United States (1996)
Japan
25.67
69.33
95.00
5.00
U.S.
45.94
51.13
97.07
2.93
Source: Table 4
Intended Bequests: (1)+(2)+(3)Unintended Bequests: (4)No Bequests: (6)Other: (5)

43

Other

Number of
Observations

Table 4: The Nature of the Respondents' Bequest Motive
Survey,Year, andCountry

(1)

(2)

(3)

(4)

(5)

(6)

(6a)

(6b)

-

-

13.56
13.17

33.69
32.61

23.61
23.14

7.23
1.75
2.56
1.58
2.49

40.79
24.55
24.16
24.92
27.33

Comparative Survey of Savings in Japan and the United States (1996)
Japan
19.28
6.39
69.33
U.S.
42.53
3.40
51.13
-

5.00
2.93

Public Opinion Survey on Saving
1989
32.61
20.14
1990
34.98
19.24

Survey on the Financial Asset Choice of Households
1992
27.61
24.37
1994
17.14
6.80
49.75
1996
18.09
6.16
1.53
47.49
1998
19.89
5.00
1.30
47.31
2001
17.61
4.94
1.57
46.06

Life Cycle
Model(2)+(4)+(6a)AltruismModel(1)+(6b)

Dynasty
Model
(3)

10.08
9.47

91.00
88.16

42.69
44.45

-

4146
3379

-

-

65.15
81.11
77.81
77.23
78.33

27.61
17.14
18.09
19.89
17.61

1.53
1.30
1.57

3788
3763
3588
3158
3055

-

-

80.72
57.47

19.28
42.53

-

1001
1058

(1) Plan to leave a bequest to my/our child or children no matter what
(2) Plan to leave a bequest to my/our child for children only if my/our child or children take care of me/us(3) Plan to leave a bequest to my/our child or children only if my/our child or children take over the family business(4) Do not plan to make any special efforts to leave a bequest to my/our child or children but will leave behind whatever happens to be left over(5) Other(6) Do not feel it is necessary to leave a bequest to my/our child or children under any circumstances(6a) Do not plan to leave a bequest to my/our child or children because I/we want to enjoy my/our own lives(6b) Do not plan to leave a bequest to my/our child or children because the expectation of receiving a bequest might cause him/her/them to lose
the will to work
Note: In cases in which a breakdown of (6) is not available, everyone selecting (6) was assumed to be of type (6a).

44

Number of
Observations

Table 5: The Division of the Respondents' Parents' Bequest
Year andCategory

(1)

(2)

(3)

(4)

1998
Head's parents
Spouse's parents

34.29
37.43

26.44
24.27

9.39
6.73

0.38
1.75

2001
Head's parents
Spouse's parents

28.04
29.62

32.43
25.09

13.85
12.20

0.51
0.00

(5)

(6)

(7)

5.94
4.68

9.96
10.23

13.60
14.91

40.04
39.18

10.64
9.06

11.66
15.68

2.87
8.36

35.30
33.45

(1) Divided equally(2) More or all to the child or children who took care of the parents(3) More or all to the child or children who took over the family business(4) More or all to the child or children who had less income(5) More or all to the eldest son/daughter even though he/she did not take care of the parents(6) Other(7) No bequests left
Source: SFACH

45

Life Cycle Altruism
Model
Model
(2)+(7)(1)+(4)

DynastyModel(3)+(5)

Number of
Observations

34.67
39.18

15.33
11.40

522
342

28.55
29.62

24.49
21.25

592
287

Table 6: The Respondents' Attitude toward Bequest Division
Survey,Year, andCountry

(1)

(2)

(3)

(4)

Survey on the Financial Asset Choice of Households
1994
34.00
18.95
3.14
1996
38.21
24.10
3.66
1998
42.75
21.91
2.62
2001
36.15
21.12
3.47

1.26
0.93
0.70
0.74

(5)

(6)

(7)

Life Cycle Altruism
Model
Model
(2)+(7)(1)+(4)

DynastyModel(3)+(5)

Number of
Observations

13.27
5.02
3.46
6.30

4.83
3.92
3.64
4.88

24.55
24.16
24.92
27.33

43.50
48.26
46.83
48.46

35.25
39.14
43.45
36.89

16.41
8.68
6.07
9.77

3763
3588
3158
3055

Comparative Survey of Savings in Japan and the United States (1996)
Japan
44.17
29.21
5.73
1.75
7.71
U.S.
84.10
3.09
0.41
0.41
2.16

6.43
6.90

5.00
2.93

34.21
6.02

45.92
84.51

13.44
2.57

1001
1058

(1) Divide equally(2) Give more or all to the child or children who take care of me/us(3) Give more or all to the child or children who take over the family business(4) Give more or all to the child or children who has less income(5) Give more or all to the eldest son/daughter even if he/she does not take care of me/us(6) Other(7) Do not feel it is necessary to leave a bequest to my/our child or children under any circumstances.

46

Table 7: The Applicability of Various Models of Household Behavior
Criterion

Life Cycle
Model
86.46
91.53

Altruism
Model
13.54
18.47

Dynasty
Model
-

1994
1996
1998
2001

81.11
77.81
77.23
78.33

17.14
18.09
19.89
17.61

1.53
1.30
1.57

Japan
U.S.

80.72
57.47

19.28
42.53

-

Division of respondents' parents' bequest

1998
2001

40.04
35.30

34.67
28.55

15.33
24.49

Division of respondents' spouse's parents' bequest

1998
2001

39.18
33.45

39.18
29.62

11.40
21.25

Respondents' attitude toward bequest division

1996
1998
2001

48.26
46.83
48.46

39.14
43.45
36.89

8.68
6.07
9.77

Japan
U.S.

34.21
6.02

45.92
84.51

13.44
2.57

Parents' bequest motive

Respondents' bequest motive

Year andCountry
1990
1992

Source: Tables 2-6

47

Table 8: Willingness to Help Others
Category
Respondent's parents
Respondent's spouse's parents
Respondent's children
Respondent's siblings
Friends
Acquaintances
Disaster victims
Strangers
Number of observations

Year
1998
88.62
84.83
91.59
61.59
11.24
1.56
3754

2001
86.37
84.38
91.86
60.30
19.43
49.34
3111

Source: SFACH
Note: These proportions show the ratio of the number of respondents
willing to help each category of individual to the number of respondents w
have at least one individual in that category.

48

Footnotes
1 This model is often referred to as the “dynasty model,” but I use this term to refer to a different model (see (3)below).
2Another formulation is to assume that parents derive utility from the amount of the bequest itself, but I
will not discuss this formulation in detail because I find it to be a bit ad hoc. This model is sometimes
referred to as the “joy of giving,” “bequest per se,” “bequest as consumption,” or “warm glow” model.
See Yaari (1964, 1965) and Andreoni (1989).

3 Transfers from parents to children include education- and marriage-related expenses, assistance withhousing purchase, etc.
4 One other practice—sentei souzoku (selective inheritance), whereby the parents or siblings selected theheir from among a number of candidates—was relatively rare and hence will not be discussed here.
5 Note that individual households may have been highly constrained in their bequest behavior by the legal
and social norms that prevailed at the time and place where they lived but that those legal and social norms
were developed by the Japanese themselves and hence were presumably influenced by their inherent
nature (i.e., by whether they are selfish, altruistic, or dynastic). I am indebted to Colin McKenzie and Ken
Yamada for this point.
6 A supplementary sample of 500 aged households was surveyed in 1988-1996 but is not included in thetabulations.
7 The proportion of respondents who received bequests from their parents may be so low partly because

the prewar custom of male primogeniture is still relatively prevalent in Japan, as a result of which younger
siblings often do not receive bequests, and because living standards were so low at the time the parents of
those currently 60 and older were in the prime, as a result of which they could not afford to leave a bequest
to their children, but these factors do not explain why the proportion of respondents planning to leave
bequests is so low (see subsection 4.2).
8 To be perfectly correct, the sample should be confined to those with one or more living children in theanalysis in this subsection and in subsection 6.2 inasmuch as those with no living children do not have theoption of leaving a bequest to their children. I confine the sample in this way in Horioka et al. (1998, 2000,
and 2001), but the results are not significantly affected.
9 As noted above, this motive is consistent with the altruism model if the reason for not leaving a bequest

is so that the expectation of receiving a bequest will not cause one’s child or children to lose the will towork, but because a breakdown by reason is not available, I have assumed that everyone selecting thismotive is selfishly motivated.
10

To be perfectly correct, the sample should be confined to those with two or more living children in theanalysis in this subsection inasmuch as one needs to decide how to divide one’s bequest among one’s
children only if one has two or more living children. I confine the sample in this way in Horioka et al.
(1998, 2000, 2001), but the results are not significantly affected.
11

The U.S. figure is remarkably consistent with Wilhelm’s (1996) finding that 88% of the decedents in his
sample divided their estates exactly equally or “approximately equally” and is also consistent with Dunn
and Phillips’s (1997) finding that 90% of the respondents named all of their children as beneficiaries intheir wills (i.e., planned to leave at least something to every child).
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12 It could be that the lower incidence of equal division in Japan is due in part to the fact that the share of

real estate (an indivisible asset) in household portfolios is much higher in Japan than it is in the U.S. I am
indebted to Masashi Nishikawa for this point.
13 However, in order to make this argument more convincing, I need to explain why individuals do not freeride. I am indebted to Kiminori Matsuyama for this point.
14 See also Ohtake (1991).
15 See also Horioka and Okui (1999) and Wakabayashi (2001).
16 In the case of the dynasty model, the current generation will care about the child who carries on thefamily line or the family business but will not care about any of its other children (see Weil (1989)).
17

Note, however, that Ricardian equivalence will not hold if intergenerational transfers are in the form of
human capital (such as investment in education) (see Drazen (1978)) and that it will not necessarily hold if
altruism is two-sided (see Kimball (1987)).

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