GCOE Discussion Paper Series
Global COE Program

Human Behavior and Socioeconomic Dynamics
Discussion Paper No.208

The “Will” to Save in China

Ting Yin

August 2011

GCOE Secretariat
Graduate School of Economics

OSAKA UNIVERSITY

1-7 Machikaneyama, Toyonaka, Osaka, 560-0043, Japan

The “Will” to Save in China
Ting Yin*
August 2, 2011
Abstract: In this paper, I discuss the actual conditions and determinants of the saving
behavior and wealth holdings of the aged in China, with emphasis on the impact ofbequest motives thereon, using micro data from the 2009 “Survey of Living Preferences
and Satisfaction” (urban households) and the 2010 “Survey of Living Preferences andSatisfaction” (rural households), which were conducted in February 2009 and January
2010, respectively, as part of the Global Center of Excellence (GCOE) Program on“Behavioral Macro-dynamics based on Surveys and Experiments” of the Graduate
School of Economics and the Institute of Social and Economic Research of Osaka
University. I found that bequest motives are strong in China, with more than 87
percent of respondents in urban areas, more than 75 percent in rural areas, and morethan 85 percent in the country as a whole having a bequest motive, that these bequests
are motivated primarily by altruism, that there is little evidence that aged households in
China dissave (decumulate their wealth), and that altruistic and selfish bequest motives,
especially the latter, increase the saving (or reduce the dissaving) of aged households.
Keywords: Bequest motives; saving behavior; wealth accumulation; life-cycle model;
altruism model
Journal of Economic Literature classification numbers: D12, D91, E21
Note: I thank my thesis advisor, Professor Charles Yuji Horioka, for his valuable advice
and suggestions. I would also like to thank Wataru Kureishi, Shizuka Sekita, Midori
Wakabayashi, and the participants of Professor Horioka’s graduate seminar at Osaka
University for their helpful comments; Fumio Ohtake for allowing me to use the micro
data from the “Survey of Living Preferences and Satisfaction;” and the Suntory
Foundation for its generous financial support.
*Correspondence to: Ting Yin, Institute of Social and Economic Research, Osaka
University, 6-1, Mihogaoka, Ibaraki 567-0047, JAPAN.
E-mail: yintingjp2001@yahoo.co.jp-0-1. Introduction

As is well-known, China’s household saving rate is high by international standards.
There are many motives for which households save, but broadly speaking we canclassify them into life-cycle motives and bequest motives.

In this paper, I discuss theactual conditions and determinants of the saving behavior and wealth holdings of theaged in China, with emphasis on the impact of bequest motives thereon, using micro
data from the 2009 “Survey of Living Preferences and Satisfaction” (urban households)
and the 2010 “Survey of Living Preferences and Satisfaction” (rural households), whichwere conducted in February 2009 and January 2010, respectively, as part of the Global
Center of Excellence (GCOE) Program on “Behavioral Macro-dynamics based on
Surveys and Experiments” of the Graduate School of Economics and the Institute ofSocial and Economic Research of Osaka University.

In so doing, I try to shed light onwhich model of household behavior (the selfish life cycle model, the altruism model, or
the dynasty model) applies in China.

The issue of which model of household behavior applies in the real world is an
important and timely one that has important implications.

It is of interest to

economists because it sheds light on which model of household behavior applies in thereal world, and it is of interest to policymakers because it determines whether householdsaving rates will decline as the population ages, whether expansionary fiscal policies
such as tax cuts are effective in stimulating consumption, whether government
redistributional policies such as pay-as-you-go social security system have real effects
on the macro economy, and whether wealth disparities are passed on from generation to-1-

generation.

There have been many previous studies of the saving behavior of the aged in Japan andthe United States (see Hurd (1990), Horioka (2010), and Kan and Horioka (2010) for
useful surveys of the previous literature).

For example, Horioka (2010) shows thatJapanese retired aged dissave and that even the working aged dissave, at least atadvanced ages, and points out that since 2000 there has been a sharp increase in the
dissaving of the retired aged due to reductions in social security benefits, increases in
consumption expenditures, and increases in taxes and social insurance premiums, whichis consistent with the life-cycle model and suggests that this model is highly applicablein the case of Japan.

There have been fewer previous studies of the impact of bequest motives on the saving
behavior of the aged.

For example, Dekle (1990) analyzes previously unanalyzed

cross sectional data with direct information on total wealth and other characteristics andusing the number of living children as a proxy for the strength of the bequest motive
finds that the Japanese aged households are not decumulating their wealth but that theindependent aged households with a bequest motive have higher wealth than those
without a bequest motive.

Ohtake and Horioka (1994) analyze micro data from aJapanese government survey and using the presence of living children as a proxy for thestrength of the bequest motive find that the aged households in Japan are decumulating
their assets and that the speed of decumulation of housing assets of the retired aged
households with a bequest motive is slower than that of those without a bequest motive
by 3 to 4 percentage points.

Alessie, Lusardi, and Kapteyn (1995) analyze panel data-2-

for the Netherlands and find using information on whether or not the respondent hasthought about leaving a bequest that there is little evidence of decumulation until
advanced ages and that the aged households with a bequest motive have significantly
higher wealth than those without a bequest motive.

Horioka, et al. (2002) analyze

micro data from a household survey conducted by the former Institute of Posts andTelecommunications Policy of the Ministry of Internal Affairs and Communications
and find that aged households in Japan are dissaving and that whether or not the
respondent intends to leave a bequest and the planned amount of the bequest both havea positive and significant impact on their rate of accumulation.

By contrast, Hurd

(1987) analyzes micro data from the Retirement History Survey, and using the presenceof living children as a proxy for the strength of the bequest motives finds that aged
households in the United States are dissaving but that bequest motives do not have asignificant impact on saving.

He speculates that this is because households with living

children prefer spending money on their children’s consumption and education toleaving an inheritance to their children or because the bequest motive variable functions
as a proxy for wealth.

Thus, the evidence is somewhat mixed, but most previous studies find that the aged
households are decumulating their wealth, and all authors except Hurd (1987) find thatbequest motives have a positive and significant impact on saving.

This paper is organized as follows: in Section 2, I discuss three theoretical models ofhousehold behavior with emphasis on their implications for bequest motives andhousehold saving behavior; in Section 3, I describe the data sources used in my-3-

analysis; in Section 4, I define the variables used in my analysis; in Section 5, I describe
the estimation model; in Section 6, I present descriptive statistics on the variables usedin the analysis with emphasis on the saving behavior of the aged and bequest motives;in Section 7, I present my estimation results; and in Section 8, I summarize my findings
and discuss the policy implications of my findings.

To preview my findings, bequest motives are strong in China, with more than 87 percent
of respondents in urban areas, more than 75 percent in rural areas, and more than 85
percent in the country as a whole having a bequest motive, and these bequests are
motivated primarily by altruism.

Moreover, I found that there is little evidence thataged households in China dissave (decumulate their wealth) but that altruistic andselfish bequest motives, especially the latter, increase the saving (or reduce thedissaving) of aged households.

2. Theoretical Models of Household Behavior and Their Implications for Bequest
Motives and for Household Saving Behavior

In this section, I briefly describe three theoretical models of household behavior and theimplications of these models for bequest motives and for household saving behavior.

a. Implications for Bequest Motives
In this subsection, we discuss the implications of each theoretical model of householdbehavior for bequest motives.

(1) The selfish life-cycle model: This model assumes that parents are selfish and do not-4-care about their children. Thus, if this model is valid, parents will not leave any
bequests at all to their children or will leave bequests only if their children provide
something in return such as co-residence, care, and/or financial support during oldage. One version of this model is the “strategic bequest motive” of Bernheim,
Shleifer, and Summers (1985). According to this theory, both parents and children
are selfish and the strategic bequest motive is regarded as payment for the in-kindservices provided by their children.

Another version of this model is proposed by

Kotlikoff and Spivak (1981), who assume that parents make an implicit annuity
contract with their children in order to cope with uncertainty concerning the timingof their death.

Since both the strategic bequest motive and the bequest as implicit

annuity contract motive are based on the selfish life-cycle model, they are called thebequest as exchange motive.

(2) The altruism model: This model assumes that parents harbor intergenerational
altruism toward their children. Thus, if this model is valid, parents will leave abequest to their children regardless of whether or not their children provide
something in return.

Becker (1974, 1981, 1991) and Stark (1995) provide the best

exposition of this model.

(3) The dynasty model: This model assume that parents wish to perpetuate their familyline or family business, and thus if this model is valid, parents will leave a bequest
to their children only if their children carry on the family line or the family business(see Chu (1991)). Thus, in this model, bequests are a quid pro quo for taking overthe family line or the family business.

-5-

As we have seen, the various theoretical models of household behavior have very
different implications for bequest motives.

b. Implications for Household Saving Behavior

I now discuss the implications of each theoretical model of household behavior forhousehold saving behavior using age-wealth profiles and age-saving profiles. Figure 1
shows the age-wealth profiles implied by each of the three theoretical models, while
Figure 2 shows the age-saving profiles implied by each of the three theoretical models.
The vertical axis of Figure 1 is the stock of household net worth and the vertical axis of
Figure 2 is the flow of household saving (change in net worth), while the horizontal axisof both figures is the age of the household head.

R is the household’s retirement age,and L is the household head’s age at death or his or her lifespan.

(1) The selfish life-cycle model with no bequests: Individuals who adhere to the selfish
life-cycle model with no bequests should save until retirement in order toaccumulate enough to finance living expenses during retirement, should financetheir living expenses during retirement using their own savings only, and should
leave no bequests to their children. Thus, their age-wealth profile should be OAL
in Figure 1, and their age-saving profile should be FHJM in Figure 2, saving a
positive amount until retirement and decumulating (dissaving) after retirement sothat their wealth is precisely exhausted at death.

-6-(2) The selfish life-cycle model with bequests: Individuals who adhere to the selfish
life-cycle model with bequests should save until retirement in order to save up
enough to finance living expenses during retirement, as in the case of the previous
model, but they should finance their living expenses during retirement using only
financial (or in-kind) assistance from their children and should leave a bequest to
their children at death as a quid pro quo for this assistance. Thus, their age-wealthprofile should be OACL in Figure 1, and their age-saving profile should be FHIKNin Figure 2. Thus, their wealth accumulation (saving) behavior until retirement
will be identical to the life-cycle model without bequests, but their wealthaccumulation (saving) behavior after retirement will very different, with nodecumulation of assets (no dissaving) until death because their living expenses
during retirement are financed by financial (and in-kind) assistance from theirchildren but a sudden decumulation of all of their wealth at the time of death inorder to leave a bequest to their children.

(3) The altruism model: Individuals who adhere to the altruism model should save more
before retirement because they need to save not only to finance their living expenses
during retirement but also because they want to leave an unrequited bequest to theirchildren. Thus, the age-wealth profile of those adhering to the altruism model
should be OBD in Figure 1, and their age-saving profile should be EGJMN in
Figure 2.

Those adhering to the altruism model should save more than thoseadhering to a selfish life-cycle model with or without bequests until retirement (asshown by the steeper slope of the age-wealth profile in Figure 1 and the higher levelof the age-saving profile in Figure 2), but after retirement, those adhering to the-7-altruism model should decumulate (dissave) at the same rate as those adhering to theselfish life-cycle model with no bequests, as shown by the identical slopes of theage-wealth profiles in Figure 1 and the identical heights of the age-saving profiles in
Figure 2.

The difference is that those adhering to the altruism model should leave

a positive bequest, as a result of which their age-wealth profile does not fall to zeroand their age-saving profile becomes sharply negative at the time of death.

(4) The dynasty model: The case of the dynasty model is virtually identical to the caseof the altruism model because children do not provide financial (or in-kind)assistance to parents during retirement and because parents leave a bequest, with the
only difference being that there is a quid pro quo for the bequest in the case of thedynasty model (namely, taking over the family life or the family business) but not in
the case of the altruism model.

Turning finally to the implications of the three theoretical models of householdbehavior for the wealth holdings of retirees, wealth holdings should be lowest for
retirees adhering to the selfish life-cycle model with no bequest motive and higher forthe other three models. As drawn in Figure 1, household wealth is highest for
retirees adhering to the altruism and dynasty models during the early retirement years
and highest for retirees adhering to the selfish life-cycle model with bequests in thelater retirement years.

Thus, we can ascertain which theoretical model of householdbehavior applies in China by looking at bequest motives and at the impact of bequest
motives on the household saving behavior of retirees.

3. Data Sources-8-

In this section, I describe the three data sources used in this analysis.

a. “Survey of Living Preferences and Satisfaction” (urban households)
The “Survey of Living Preferences and Satisfaction” (urban households) (hereafterreferred to as the ”Urban Survey”) was conducted in January 2009 as part of the Global
Center of Excellence (GCOE) Program on “Behavioral Macro-dynamics based on
Surveys and Experiments” of the Graduate School of Economics and the Institute ofSocial and Economic Research of Osaka University. 1380 respondents aged 20 to 69
living in six major cities (Shanghai, Beijing, Chengdu, Guangzhou, Shenyang, andWuhan) of China were selected at random and interviewed face-to-face.

b. “Survey of Living Preferences and Satisfaction” (rural households)
The “Survey of Living Preferences and Satisfaction” (rural areas) (hereafter referred toas the “Rural Survey”) was conducted in January 2010 and used a questionnaire similar
to the “Urban Survey.”

1000 respondents aged 20 to 69 living in twelve rural areas ofChina (Zhuzhou, Xiangtan, and Hengyang of Hunan province, Xiaogan, Jingzhou, and
Huanggang of Hubei province, Nanchong, Yibin, and Dazhou of Sichuan province andJingzhou, Fushun and Liaoyang of Liaoning province) were selected at random andinterviewed face-to-face.

Both surveys collected a variety of detailed information on respondents such as theirbequest motives, age, sex, marital status, occupation, educational attainment, number ofchildren, and income.

Thus, they are well-suited for conducting the analysis in this-9-

paper.

I used the sample of single (widowed or divorced) males and married couples who haveat least one child, whose (male) household head is 60 years old or older and retired, andfor whom all of the necessary information is available in the case of the Urban Survey
and the same sample in the case of the Rural Survey except that households with retired
as well as working (male) household heads were included in the sample since most rural
household heads continue working even after the age of 60.

c. “Main Indicators of Real Estate in 35 Large and Medium-sized Cities” (2008)
Data on the sales price of condominiums per square meter by city in China were takenfrom this data source.

These data are included in Chapter 5 of the 2009 edition of theStatistics Yearbook of China (National Bureau of Statistics of China (2009)).

4. Variable Definitions

In this section, I define the dependent and explanatory variables used in my analysis.

The dependent variables I use are as follows:

LnNW (the log of net worth)
LnFINA (the log of net financial assets)
LnFIXA (the log of net housing assets)- 10 -

The Urban and Rural Surveys collect detailed information on the composition of
respondents’ financial assets and housing assets.

Respondents were asked:① How much is the present appraised value of all housing and other real estate that theentire household owns? (If you are a student, please answer about the housing andother real estate that your parents’ entire household owns.)② How much is the outstanding balance of financial assets (saving, stocks, insurance,etc.) of your entire household?
③ Do you currently have any liabilities or debts?

Liabilities or debts include housing

loans.
(i) No liabilities or debts(ii) Have liabilities or debts(continue to ④)④

What is the current balance of your housing loans?

⑤

What is the current balance of your liabilities or debts other than housing loans?

NW (net worth) was defined as the sum of the current balance of fixed assets andfinancial assets net of liabilities and was calculated as ①＋②―④－⑤.

FINA (net financial assets) was defined as the current balance of financial assets net of
non-housing loans and was calculated as ②－④.

FIXA (net fixed assets) was defined as the current balance of fixed assets net of housing- 11 -

loans and was calculated as ①－③.

The explanatory variables I used are as follows:

BEQUEST (bequest motive dummy)
In both the Urban and Rural Surveys, respondents were asked how they feel about
leaving an inheritance to their children.

The options given were as follows:

1. I plan to leave an inheritance to my child(ren) no matter what.
2. I plan to leave an inheritance to my child(ren) if they provide care (including
nursing care) during old age.
3. I plan to leave an inheritance to my child(ren) only if they provide financial
assistance during old age.
4. I plan to leave an inheritance to my child(ren) only if they carry on the familybusiness.
5. I do not plan to make special efforts to leave an inheritance to my child(ren) but
will leave whatever is left over.
6. I do not plan to leave an inheritance to my child(ren) under any circumstances
because doing so may reduce their will to work.
7. I do not plan to leave an inheritance to my child(ren) under any circumstances
because I want to use my wealth myself.
8. I want to leave an inheritance to my child(ren) but I won’t because I don’t have
- 12 -

the financial capacity to do so.

BEQUEST (five bequest motive dummies)
I used the following five dummy variable pertaining to bequest motives: ABEQUEST, adummy variable that equals one if parents plan to leave an inheritance to their child(ren)no matter what and zero otherwise, SBEQUEST1, a dummy variable that equals one if
parents plan to leave an inheritance to their child(ren) if they provide care (including
nursing care) during old age and zero otherwise, SBEQUEST2, a dummy variable that
equals one if parents plan to leave an inheritance to their child(ren) only if they provide
financial assistance during old age and zero otherwise, DBEQUEST, a dummy variable
that equals one if parents plan to leave an inheritance to their child(ren) only if they
carry on the family business and zero otherwise, UBEQUEST, a dummy variable that
equals one if parents do not plan to make special efforts to leave an inheritance to theirchild(ren) but will leave whatever is left over and zero otherwise. The default category
is those not planning to leave a bequest at all (options 6, 7, and 8).

(I will sometimes

refer to the first four motives collectively as “intended bequest motives” and the fifth
motive as an “unintended bequest motive.”)

HAGE (the age of the male household head)

BEQUEST*HAGE (the cross-product of the five bequest dummies and HAGE)- 13 -

INCOME (parental income)INCOME is the annual income of the respondent and his or her spouse (if any) in unitsof million yuan.

ADIFF (the age difference between husband and wife)
ADIFF is calculated by subtracting the wife’s age from the husband’s age.

If the male

household head is unmarried, ADIFF is set equal to zero.

MARRY (a dummy for the male household head’s marital status)
MARRY is a dummy variable that equals one if the male household head is married andliving with his spouse and zero otherwise.

HEDU (the male household head’s educational attainment)
In the Urban Survey, HEDU is defined as the number of years of schooling received by
the male household head.

It was set equal to three if the male household head did notreceive a primary education or dropped out of primary school, to six if his final
educational attainment was graduation from primary school, to nine if he graduatedfrom junior high school, to 10.5 if he received some high school education but did not
graduate, to twelve if he graduated from high school, to thirteen if he received somejunior college education without obtaining a degree, to fourteen if he graduated from ajunior college with an associate’s degree or received some education at a four-yearcollege without obtaining a bachelor’s degree, to sixteen if he graduated from a- 14 -

four-year college with a bachelor’s degree, to 17.5 if he did some post-graduate study
without obtaining a master’s degree, to eighteen if he received a master’s degree, to 19.5
if he did some doctoral studies without obtaining a doctoral degree, and to twenty-one if
he received a doctoral degree. Respondents who chose “I don’t know” were dropped
from the sample.

Since respondents were given different options in the question about educational
attainment in the rural survey, HEDU was set equal to zero if the male household headis illiterate, to three if he did not receive a primary education or dropped out of primaryschool, to six if his final educational attainment was graduation from primary school, tonine if he graduated from junior high school, to twelve if he graduated from high school,
to fourteen if he received some education at a four-year college without obtaining abachelor’s degree, to sixteen if he graduated from a four-year college with a bachelor’s
degree, and to eighteen if he received a master’s degree or a doctoral degree.
Respondents who chose “I don’t know” were dropped from the sample.

WORK (a dummy variable for the employment status of the male household head)In both the Urban and Rural Surveys, respondents were asked which of the following
choices corresponds to their occupation and their spouse’s occupation:
1. Clerical worker (general, business-related, etc.)
2. Sales worker (retail shop owner, sales clerk, sales representative, etc.)
3. Managerial worker (government or company worker with the rank of section chief or- 15 -

higher, member of the board of directors, etc.)
4. Professional or technical worker (teacher, doctor, engineer, writer, etc.)
5. Service worker (hairdresser, waiter, waitress, taxi driver, security guard, etc.)
6. Blue-collar worker (carpenter, repairperson, factory worker, etc.)
7. Agriculture, forestry, and fisheries
8. Housewife or househusband
9. Student
10. Retired (excluding housewife and househusband)
11. Unemployed (excluding for housewife and househusband)
12. Other

WORK is a dummy variable that equals one if the respondent chose options 1 to 7 andzero if the respondent chose options 8 to 11.

Respondents who chose options 12 were

dropped from the sample. However, this variable was not included when the urban
sample was used because I confined the sample to households in which the male
household head is retired.

RR (housing price index)
RR is a housing price index calculated as the average sales price of condominiums per
square meter in each city divided by the average income of households with a male
household head aged 60 years old or older in that city.
- 16 -

However, this variable was notincluded when using the rural sample or the full sample because data on the sale price ofcondominiums per square meter are not available in the case of rural areas.

RURAL (rural dummy)
RURAL is a dummy variable that equals one if the respondent is a rural household andzero otherwise (i.e., if the respondent is an urban household). This variable wasincluded only when the full sample was used.

5. Estimation ModelIn this section, I describe the estimation model used in my analysis.

I use thefollowing estimation model:

In(NW)= a + b(BEQUEST) + c(HAGE) + d(BEQUEST*HAGE) + e(ADIFF)+ f(INCOME) + ｇ*X(X: other explanatory variables)

Regarding the impact of the five bequest dummies, we showed in section 3 that retirees
with some kind of bequest motive will hold more wealth than retirees not planning toleave a bequest, with retirees planning to leave a bequest for altruistic or dynastic
reasons (ABEQUEST and DBEQUEST, respectively) holding the most wealth in theearly retirement years and retirees planning to leave a bequest for selfish reasons(SBEQUEST1 and SBEQUEST2) holding the most wealth in the later retirement years.
- 17 -

However, since retirees planning to leave bequests for altruistic reasons will leave abequest no matter what whereas retirees planning to leave a bequest for dynastic andselfish reasons will not leave a bequest unless their children fulfill their end of thebargain, the wealth holdings of retirees planning to leave a bequest for dynastic or
selfish reasons will tend to be lower than that of retirees planning to leave bequests for
altruistic reasons.

Finally, retirees who do not plan to make special efforts to leave an

inheritance to their child(ren) and who plan to leave whatever is left over (UBEQUEST)
would be expected to hold less wealth than retirees with a stronger bequest motive for
obvious reasons.

Regarding the impact of parental income (INCOME), if parents’ own income is higher,
they should be able to accumulate more wealth.

Thus, the impact of parental income

should be positive.

Regarding the impact of the age of the male household head (AGEH), the life-cycle
model predicts that the aged households will decumulate their wealth after retirement so
the impact of age should be negative.

Regarding the impact of the cross-product of BEQUEST and AGEH, the coefficient of
this variable shows how much faster or slower aged households who have a bequest
motive accumulate or decumulate assets than aged households who do not have abequest motive. Since we would expect aged households with a bequest motive toaccumulate assets more rapidly or decumulate assets less rapidly than the aged
households without a bequest motive, we would expect the impact of the cross-product- 18 -

of BEQUEST and AGEH to be positive.

Regarding the impact of the age difference between husband and wife (ADIFF), its
impact on wealth should be positive because the couple’s retirement span will be longer
and the couple will require more wealth to finance living expenses during retirement,
the larger is the age difference between husband and wife.

Regarding the impact of housing prices (RR), when housing prices are higher relative tohousehold income, a house of a given size will cost more and thus (assuming thedemand for housing is relatively price-inelastic) aged households would be expected tohold more housing assets.

Thus, the impact of housing prices should be positive.

Regarding the impact of the rural dummy (RURAL), aged households who live in rural
areas would presumably hold less wealth for living expenses during old age because
most of them continue working even in old age and because consumer prices are much
lower in rural areas. Thus, the impact of the rural dummy should be negative.

6. Descriptive Statistics

In this section, I present descriptive statistics on the variables used in the analysis withemphasis on saving behavior and bequest motives.

a. Descriptive Statistics for Dependent and Explanatory Variables
Table 1 shows descriptive statistics for all variables used in the analysis for urban, rural,- 19 -

and all households, and as can be seen from this table, the proportion of aged
households that plan to leave an inheritance to their children no matter what (analtruistic bequest motive) is 33.3 percent in urban areas, 30.7 percent in rural areas, and32.5 percent in the country as a whole.

The proportion of aged households that plan toleave an inheritance to their children if they provide care (including nursing care) during
old age (a selfish or exchange-type bequest motive) is 11.8 percent in urban areas, 7.9
percent in rural areas, and 10.6 percent in the country as a whole.

The proportion ofaged households that plan to leave an inheritance to their children only if they provide
financial assistance during old age (another selfish or exchange-type bequest motive) is
3.3 percent in urban areas, 5.3 percent in rural areas, and 3.9 percent in the country as awhole. Thus, aged households who have one or the other selfish or exchange-type
bequest motive is 15.1 percent in urban areas, 13.2 percent in rural areas, and 14.5
percent in the country as a whole. The proportion of aged households that plan toleave an inheritance to their children only if they carry on the family business (adynastic bequest motive) is 6.9 percent in urban areas, 5.3 percent in rural areas, and 6.4
percent in the country as a whole. The proportion of aged households that do not plan
to make special efforts to leave an inheritance to their children but will leave whateveris left over is 32.1 percent in urban areas, 31.6 percent in rural areas, and 31.9 percent in
the country as whole.

Thus, the proportion of aged households with a bequest motive

is 87.4 percent in urban areas, 75.5 percent in rural areas, and 85.3 percent in the
country as a whole.

It seems that the Chinese aged have a strong bequest motive andthat bequest motives are somewhat stronger in rural areas than in urban areas.

b. Data on Wealth Holdings by Bequest Motive- 20 -

Table 2 presents data on average holdings of net worth, net financial assets, and net
fixed assets of aged households by bequest motive for urban, rural, and all households.
In urban areas and in the country as a whole, aged households with some kind of
intended bequest motive (the first four motives)

have much higher holdings of all

types of assets than households with an unintended bequest motive (motive 5) andhouseholds not planning to leave an inheritance at all (motive 6). For example, aged
households that plan to leave an inheritance to their children only if they provide
financial assistance during old age (a selfish or exchange-type bequest motive) have thehighest net worth and net fixed assets and the second highest net financial assets of any
bequest motive (the fourth highest net financial assets of any bequest motive in the caseof urban households).

Aged households that plan to leave an inheritance to theirchildren no matter what (an altruistic bequest motive) have the highest net financial
assets and the second highest net worth and net fixed assets of any bequest motive.
Aged households that plan to leave an inheritance to their children only if they provide
care (including nursing care) during old age (another selfish or exchange-type bequest
motive) have the third highest net worth, net financial assets, and net fixed assets (withthe only exception being that they have they have the second highest net financial assets
in the case of urban households), and those who plan to leave an inheritance to theirchildren only if they carry on the family business (a dynastic bequest motive) have thefourth highest net worth, net financial assets, and net fixed assets (with the only beingthat they have the third highest net financial assets in the case of urban households).

In rural areas, the patterns are less clear (perhaps because the sample size is too small),with aged households with an unintended bequest motive having higher net worth and- 21 -

net fixed assets than aged households with an intended bequest motive, but householdswith an altruistic bequest motive have the highest net financial assets, the second
highest net worth, and the third highest net fixed assets, and households with a dynastic
bequest motive have the second highest net worth and the fourth highest net worth andnet fixed assets of any bequest motive.

In general, it appears that households with a bequest motive (especially an intended
bequest motive) have much higher holdings of all types of assets than households withno bequest motive, especially in urban areas, which suggests that bequest motives havethe expected impact on saving behavior.

However, I need to perform a regression

analysis in order to ascertain whether or not this conclusion holds up even after
controlling for other factors.

c. Data on Wealth Holdings by Age and Retirement Status
Finally, Table 3 shows average holdings of each asset type by five-year age group andretirement status for urban, rural, and all households.

As we discussed in section 2, wewould expect wealth to increase with age until retirement age if households plan tofinance their living expenses during retirement using their own savings, but there is noclear trend in asset holdings by age until age 59, perhaps because the increase in wealthis obscured by the cohort effect in conjunction with very high rates of income growth,
as a result of which lifetime income decreases sharply with age. We can, however,observe a fairly substantial increase in holdings of all asset types in all samples from the
20-24 age group to the 25-29 or 30-34 age group (in one case until the 35-39 age- 22 -

group).

Turning to trends after age 60 (the mandatory retirement age for salaried workers in
China), there is a clear decline in holdings of all asset types from the 55-59 age group to
the 60-64 age group in the case of the urban and rural samples and an even sharper
decline if we compare all households in the 55-59 age group to retirees in the 60-64 age
group in the case of the urban sample.

However, trends are less clear in the case of thenation-wide sample, with net financial assets and net fixed assets showing a decline
from the 55-59 age group to the 60-64 age group, as expected (except that net fixed
assets show an increase if all households in the 55-59 age group are compared to retired
households in the 60-64 age group), but with net worth showing an increase, contrary to
expectation.

Moreover, there is a slight increase in holdings of all asset types in all samples from the
60-64 age group to the 65-and-over age group, contrary to expectation, whether we lookat all households or retired households except in the case of net financial assets in thesample of all rural households and in the nation-wide sample of retired households.

Thus, age-wealth profiles show a mixed picture, with some evidence in favor of thelife-cycle model and some evidence against it. A definitive verdict must await theresults of my regression analysis, which controls for the impact of other variables.
to such an analysis that I turn in the next section.

- 23 -It is7. Estimation Results concerning the Determinants of the Saving Behavior of
Aged Households

In this section, I present the estimation results of my regression analysis of thedeterminants of the saving behavior of the aged.

Tables 4-6 show the estimation

results for urban households, rural households and all households, respectively.

Model 1 of Tables 4-6 shows the estimation results with bequest motive dummies inisolation, model 2 shows the estimation results with the cross-products of the bequest
motive dummies and the age of the male household head only, and model 3 shows theestimation results including both the bequest motive dummies in isolation and thecross-products of the bequest motive dummies and the age of the male household head.
I discuss the estimation results of the models with both the bequest motive dummies inisolation and the cross-product terms first, then the models with only the bequest motive
dummies in isolation, and lastly the models with only the cross-product terms.

a. Estimation Results for Urban Households (Table 4)(1) Estimation Results based on Net WorthTurning first to the estimation results based on net worth and looking first at theestimation results for model (3), which contains the age of the male household head aswell as the cross-products of the bequest motive dummies and the age of the male
household head, the coefficients of most of the bequest dummies entered in isolation are- 24 -

not significant, indicating that the level of net worth of aged households with mostbequest motives is not significantly different from that of aged households without abequest motive. The only bequest motive dummy whose coefficient is significant is
one of the two selfish bequest dummies (SBEQUEST2).

Its coefficient is negative andsignificant, which indicates that the level of net worth of aged households planning toleave a bequest only if their children provide financial assistance is significantly lower
than that of those without a bequest motive, as expected.

Since both HAGE, the age of the male household head, and the cross-products of
HAGE and the bequest motive dummies are included in the regression equation, thecoefficient of the age of the male household head measures the annual rate ofaccumulation or decumulation of the net worth of aged households without a bequest
motive. The coefficient of HAGE is negative but not significant, suggesting that aged
households without a bequest motive do not accumulate or decumulate their net worth.

The coefficient of the cross-products of HAGE and the bequest motive dummies
indicates by how much the annual rate of accumulation of the net worth of aged
households with a bequest motive exceeds that of aged households without a bequest
motive.

Most of the coefficients of these cross-product terms are not significant,indicating that the annual rate of accumulation of the net worth of aged households witha bequest motive does not significantly differ from that of aged households without abequest motive. The only cross-product term whose coefficient is significant is SBA2.
Its coefficient is positive and significant, which indicates that the annual rate of- 25 -

accumulation of the net worth of aged households planning to leave a bequest only iftheir children provide financial assistance is significantly higher than that of those
without a bequest motive, as expected.

Moreover, since the annual rate ofaccumulation of households with a bequest motive can be computed as the sum of thecoefficient of HAGE in isolation and the coefficient of the cross-product of HAGE andthe bequest motive dummy and since the coefficient of HAGE in isolation is
insignificant, the aforementioned result suggests that aged households with a selfish
bequest motive relating to financial assistance continue accumulating net worth evenafter retirement.

Turning next to the estimation results for model (1), which contains only the bequest
motive dummies in isolation, the coefficients of three out of the five bequest motive
dummies (the altruistic bequest motive dummy (ABEQUEST) and the two selfish
bequest motive dummies (SBEQUEST1 and SBEQUEST2)) are positive and significant,indicating that the level of net worth of aged households with an altruistic bequest
motive or a selfish bequest motive is significantly higher than that of those without abequest motive. However, differences among the three coefficients are not statisticallysignificant.

Turning next to the estimation results for model (2), which contains only thecross-products of the bequest motive dummies and the age of the male household head,the coefficient of HAGE, the age of the male household head, is positive but
insignificant, suggesting that aged households without a bequest motive do not- 26 -

accumulate or decumulate net worth.

Three out of the five coefficients of the cross-products of HAGE and the bequest motive
dummies (ABA, SBA1 and SBA2) are significant, indicating that the annual rate ofaccumulation of the net worth of aged households with an altruistic or selfish bequest
motive is significantly higher than that of aged households without a bequest motive, as
expected.

Moreover, since the annual rate of accumulation of households with abequest motive can be computed as the sum of the coefficient of HAGE in isolation andthe coefficient of the cross-product of HAGE and the bequest motive dummy and since
the coefficient of HAGE in isolation is insignificant, the aforementioned result suggeststhat aged households with an altruistic or selfish bequest motive continue accumulating
net worth even after retirement.

Turning to the coefficients of the other explanatory variables, the coefficient of parental
income is positive and significant in all three models, and since parental income can be
regarded as a proxy for lifetime income, this result suggests that aged households withhigher lifetime incomes have higher net worth than aged households with lower lifetime
incomes.

The coefficient of the male household head’s educational attainment is

positive and significant in all three models, suggesting that aged households with higher
educational attainments have higher net worth than those with lower educational
attainments.

Finally, the coefficients of the housing price index, the marital status

dummy, and the age difference between husband and wife are not significant.

- 27 -

(2) Estimation Results based on Net Financial Assets
Turning next to the estimation results based on net financial assets and looking first at
the estimation results for model (3), the coefficients of most of the bequest dummies
entered in isolation are not significant, indicating that the level of net financial assets ofaged households with most bequest motives is not significantly different from that ofaged households without a bequest motive.

The only bequest motive dummies whose

coefficients are significant are the two selfish bequest dummies (SBEQUEST1 and
SBEQUEST2). Their coefficients are negative and significant, which indicates thatthe level of net worth of aged households planning to leave a bequest only if theirchildren provide care or financial assistance is significantly lower than that of those
without a bequest motive, contrary to expectation.

The coefficient of HAGE, the age of the male household head, is negative but notsignificant, suggesting that aged households without a bequest motive do notaccumulate or decumulate their net financial assets.

Two out of the five coefficients of the cross-products of HAGE and the bequest motive
dummies (SBA1 and SBA2) are positive and significant, indicating that the annual rateof accumulation of the net financial assets of aged households planning to leave abequest only if their children provide care or financial assistance is significantly higher
than that of those without a bequest motive, as expected.

Moreover, since the annual

rate of accumulation of households with a bequest motive can be computed as the sumof the coefficient of HAGE in isolation and the coefficient of the cross-product of- 28 -

HAGE and the bequest motive dummy and since the coefficient of HAGE in isolation is
insignificant, the aforementioned result suggests that aged households with a selfish
bequest motive continue accumulating net worth even after retirement.

Turning next to model (1), the coefficients of the altruistic bequest motive dummy(ABEQUEST), one of the two selfish bequest motive dummies (SBEQUEST1), and thedynastic bequest motive dummy (DBEQUEST) are positive and significant, indicatingthat the level of net worth of aged households with an altruistic, selfish, or dynastic
motive is significantly higher than that of aged households without a bequest motive, as
expected.

The coefficient of HAGE, the age of the male household head, is positive but
insignificant, suggesting that aged households do not accumulate or decumulate net
worth.

Turning next to the estimation results for model (2), the coefficient of HAGE, the age ofthe male household head, is positive but insignificant, suggesting that aged households
without a bequest motive do not accumulate or decumulate net worth.

The coefficients of three out of the five cross-products of HAGE and the bequest motive
dummies (ABA, SBA2 and DBA) are positive and significant, indicating that the annual
rate of accumulation of net financial assets of aged households planning to leave a- 29 -

bequest to their children no matter what or only if their children provide financial
assistance or carry on the family business is significantly higher than that of aged
households without a bequest motive, as expected.

Moreover, since the annual rate ofaccumulation of households with a bequest motive can be computed as the sum of thecoefficient of HAGE in isolation and the coefficient of the cross-product of HAGE andthe bequest motive dummy and since the coefficient of HAGE in isolation is
insignificant, the aforementioned result suggests that aged households with an altruistic,
selfish, or dynastic bequest motive continue accumulating net worth even after
retirement.

Turning to the coefficients of the other explanatory variables, the coefficient of the male
household head’s educational attainment is positive and significant in all three models,meaning that aged households with a higher educational attainment hold more net
financial assets than aged households a lower educational attainment.

The coefficientsof parental income, the housing price index, the marital status dummy, and the age
difference between husband and wife are not significant.

(3) Estimation Results based on Net Fixed Assets
Turning finally to the estimation results based on net fixed assets and looking first at theestimation results for model (3), none of the coefficients of the bequest dummies
entered in isolation are significant, indicating that the level of net worth of aged
households with a bequest motive is not significantly different from that of aged
households without a bequest motive.
- 30 -

The coefficient of HAGE, the age of the male household head, is positive but notsignificant, suggesting that aged households without a bequest motive do notaccumulate or decumulate net fixed assets, and the coefficients of the cross-productterms of HAGE and the bequest motive dummies are not significant either, indicatingthat the annual rate of accumulation of the net fixed assets of aged households with abequest motive does not differ significantly from that of aged households without abequest motive.

Turning next to the estimation results for model (1), the coefficients of three out of thefive bequest motive dummies (ABEQUEST, SBEQUEST1, and SBEQUEST2) are
positive and significant when entered in isolation, indicating that the level of net fixed
assets of aged households with an altruistic or selfish bequest motive are significantly
higher than that of aged households without a bequest motive.

However, differencesamong the three coefficients are not statistically significant.

The coefficient of HAGE, the age of the male household head, is positive but
insignificant, suggesting that aged households continue accumulating net fixed assets
even after retirement, contrary to expectation.

Turning next to the estimation results for model (2), the coefficient of HAGE, the age ofthe male household head, is positive and significant, suggesting that aged households
without a bequest motive continue accumulating net fixed assets even after retirement,- 31 -

contrary to expectation.

The coefficients of three out of the five cross-products of HAGE and the bequest motive
dummies (ABA, SBA1 and SBA2) are positive and significant, indicating that theannual rate of accumulation of the net worth of aged households planning to leave abequest to their children no matter what or only if their children provide care and/or
financial assistance is significantly higher than that of aged households without abequest motive, as expected.

However, differences among the three coefficients are

not statistically significant.

Since the annual rate of accumulation of households witha bequest motive can be computed as the sum of the coefficient of HAGE in isolationand the coefficient of the cross-product of HAGE and the bequest motive dummy andsince the coefficient of HAGE is positive and significant, our results imply that aged
households with an altruistic or selfish bequest motive continue accumulating net wortheven after retirement.

Turning to the coefficients of the other explanatory variables, the coefficients ofparental income and the male household head’s educational attainment are positive andsignificant in all three models, as in the case of net worth.

Moreover, the coefficient of

the housing price index is also positive and significant in all three models, which
implies that aged households that live in an area with high housing prices accumulate
their net fixed assets more rapidly than aged households that live in an area with low
housing prices.

The coefficients of the marital status dummy and the age difference

between husband and wife are not significant.
- 32 -

b. Estimation Results for Rural Households (Table 5)(1) Estimation Results based on Net Worth and Net Fixed Assets
Turning next to the estimation results for rural households and looking first at theestimation results based on net worth and net fixed assets, none of the coefficients of thebequest motive dummies entered in isolation, HAGE (the age of the male householdhead), and the cross-products of HAGE and the bequest motive dummies are significant
in any of the three models, indicating that the level of net worth and net fixed assets ofaged households with bequest motives is not significantly different from that of those
without a bequest motive, that aged households without a bequest motive do notaccumulate or decumulate their net worth or net fixed assets, and that the annual rate ofaccumulation of the net worth or net fixed assets of aged households with a bequest
motive does not differ significantly from that of aged households without a bequest
motive.

(2) Estimation Results based on Net Financial Assets
Turning next to the estimation results based on net financial assets and looking first at
the estimation results for model (3), the results are clearest in this case.

Thecoefficients of three out of the five bequest motive dummies (SBEQUEST1,
SBEQUEST2, and UBEQUEST) are negative and significant, indicating that the levelof net financial assets of aged households planning to leave a bequest only if theirchildren provide care or financial assistance and of aged households not planning to
make special efforts to leave an inheritance to their children but planning to leave- 33 -

whatever is left over is significantly lower than that of those without a bequest motive,
contrary to expectation.

The coefficient of HAGE, the age of the male household head, is negative andsignificant, indicating that aged households decumulate their net financial assets after
retirement, as expected.

The coefficients of three out of the five cross-products of HAGE and the bequest motive
dummies (SBA1, SBA2 and UBA) are positive and significant, indicating that theannual rate of accumulation of the net financial assets of aged households planning toleave a bequest only if their children provide care and/or financial assistance or notplanning to make special efforts to leave an inheritance to their children but planning toleave whatever is left over is significantly higher than that of those without a bequest
motive, as expected.

However, differences among the three coefficients are notstatistically significant.

Since the annual rate of accumulation of households with abequest motive can be computed as the sum of the coefficient of HAGE in isolation andthe coefficient of the cross-product of HAGE and the bequest motive dummy and since
the coefficient of HAGE in isolation is negative and significant and smaller in absolutemagnitude than the coefficients of SBA1 and SBA2 and almost identical in absolutemagnitude to the coefficient of UBA, the aforementioned results suggest that aged
households with a selfish bequest motive continue accumulating net financial assets
after retirement and that aged households with an unexpected bequest motive neither
accumulate nor decumulate net financial assets even after retirement.
- 34 -

Turning to the coefficients of the other explanatory variables, the coefficient of parental
income is positive and significant and the coefficient of the age difference between
husband and wife is negative and significant in the case of all three dependent variables
and all three models. The latter result is contrary to expectation because a larger age
difference means a longer retirement period and hence should increase rather thandecreasing wealth holdings.

Finally, the coefficient of the dummy variable for theemployment status of the male household head is negative and significant in the case of
net worth and net fixed assets, implying that the net worth and net fixed assets of aged
households who are still working is lower than those of aged households who are notworking. The coefficients of the male household head’s educational attainment and themarital status dummy are not significant in the case of any of the three dependent
variables and any of the three models.

c.

Estimation Results for the Pooled Sample (Table 6)

Turning finally to the estimation results for the pooled sample of urban and rural
households, the results are very similar to the estimation results for urban households
only and thus I will discuss only the differences relative to the results for urbanhouseholds.

(1) Estimation Results based on Net WorthLooking first at the estimation results based on net worth, the estimation results formodel (3) are very similar to the estimation results for urban households only while the- 35 -

estimation results for models (1) and (2) are somewhat different, with the coefficients of
ABEQUEST, SBEQUEST1 and SBEQUEST2 being positive and significant in the caseof urban households only and the coefficients of ABEQUEST and DBEQUEST being
positive and significant in the case of the pooled sample in model (1) and thecoefficients of ABA, SBA1, and SBA2 being positive and significant in the case ofurban households only and the coefficients of ABA, DBA, and UBA being significant in
the case of the pooled sample in model (2).

(2) Estimation Results based on Net Financial Assets
Turning to the estimation results based on net financial assets, the estimation results arevery similar to those for urban households, with the only difference being that, in thecase of model (2), the coefficients of ABA, SBA2, and DBA are positive and significant
in the case of urban households but that the coefficients of ABA, SBA1, SBA2, andDBA are positive and significant in the case of the pooled sample.

(3) Estimation Results based on Net Fixed Assets
Turning finally to the estimation results based on net financial assets, the estimation
results are generally similar to those for urban households, with the only differences
being that, in the case of model (1), the coefficients of ABEQUEST, SBEQUEST1,
SBEQUEST2, and HAGE are positive and significant in the case of urban households
but that only the coefficients of ABEQUEST and UBEQUEST are positive andsignificant in the case of the pooled sample, and similarly, that in the case of model (2),the coefficients of ABA, SBA1, SBA2, and HAGE are positive and significant in the- 36 -

case of urban households but that only the coefficients of ABA and UBA are positiveand significant in the case of the pooled sample. The only other major difference isthat the coefficient of ADIFF is insignificant in the case of urban households but
negative and significant (contrary to expectation) in the case of the pooled sample,
presumably because most rural households continue working even in old age andbecause consumer prices are much lower in rural areas.

The coefficients of the otherexplanatory variables are very similar to those for urban households.

8. Conclusion and Policy Implications
In this paper, I discussed the actual conditions and determinants of the saving behavior
and wealth holdings of the aged in China, with emphasis on the impact of bequest
motives thereon, using micro data from the 2009 “Survey of Living Preferences andSatisfaction” (urban households) and the 2010 “Survey of Living Preferences andSatisfaction” (rural households), which were conducted in February 2009 and January
2010, respectively, as part of the Global Center of Excellence (GCOE) Program on“Behavioral Macro-dynamics based on Surveys and Experiments” of the Graduate
School of Economics and the Institute of Social and Economic Research of Osaka
University.

More specifically, I used three subsamples of older respondents (definedas those who are aged 60 or old)—retired households living in urban areas, aged
households living in rural areas, and the pooled sample of both—to analyze the impact
of bequest motives and other factors on the saving behavior of aged households.
My main findings are as follows: Bequest motives are strong in China, with more than87 percent of respondents in urban areas, more than 75 percent in rural areas, and more
- 37 -

than 85 percent in the country as a whole having a bequest motive, and these bequests
are motivated primarily by altruism.

Moreover, I found that there is little evidence thataged households in China dissave (decumulate their wealth) but that altruistic andselfish bequest motives, especially the latter, increase the saving (or reduce thedissaving) of aged households.

Turning to the policy implications of my findings, my finding that bequests are
motivated more by altruistic motives than by selfish or exchange-related motives in
China implies that expansionary fiscal policies such as tax cuts financed by the issuanceof government bonds will not be very effective in stimulating consumption because
individuals will care about the tax burden that will have to be imposed on future
generations to retire those bonds and that government redistributional policies such as
pay-as-you-go social security systems will not necessarily be very effective because
they will be offset by transfers in the other direction (from parents to children).

Secondly, this finding also implies that bequests will not necessarily be offset bytransfers in the other direction (from children to parents), meaning that there is a danger
that wealth disparities will passed on from generation to generation and therefore that it
may be desirable to introduce estate taxes.

Thirdly, my finding that aged households in China do not dissave (decumulate theirassets) very much, in large part due to the presence of bequest motives, implies that thehousehold saving rate will not necessarily decline even though China’s population is- 38 -

projected to age very rapidly due it large part to the one-child policy.

Turning finally to directions for future research, I have already analyzed the impact ofbequest motives on parent-child co-residence in China (see Yin (2010)), but in the
future, I plan to analyze the impact of bequest motives on other economic decisions
such as the labor supply and retirement decisions of parents and children’s decisions
concerning providing care and financial assistance to their parents.

- 39 -

References

Alessie, Rob; Lusardi, Annamaria; and Kapteyn, Arie (1995), “Saving and Wealth
Holdings of the Aged Households,” Ricerche Economiche 49, 293-315.

Becker, Gary S. (1974), “A Theory of Social Interactions,” Journal of Political
Economy 82, 1095-1117.

Becker, Gary S. (1981), A Treatise on the Family.

Harvard University Press,

Cambridge, MA, USA.

Becker, Gary S. (1991), A Treatise on the Family, enlarged edition.

Harvard

University Press, Cambridge, MA, USA.

Bernheim, B. Douglas; Shleifer, Andrei; and Summers, Lawrence H. (1985), “TheStrategic Bequest Motive,” Journal of Political Economy 93, 1045-1076.

Dekle, Robert (1990), “Do the Japanese Aged Households Reduce Their Total Wealth?
A New Look with Different Data,” Journal of the Japanese and International
Economies 4, 309-317.

Horioka, Charles Yuji (2010), “The (Dis)saving Behavior of the Aged in Japan,.” Japanand the World Economy. vol. 22, no. 3 (August), pp. 151-158.

- 40 -

Horioka, Charles Yuji (2002), “Nihonjin no Isan Douki no Juuyoudo・Seishitsu・Eikyou
ni tsuite,” in Charles Yuji Horioka and Institute of Posts and Telecommunications Policyof the Ministry of Internal Affairs and Communications, eds., Yuusei Kenkyuu Geppou,
163, 4-31 (in Japanese).

Horioka, Charles Yuji; and Yin, Ting (2009), “Cross-Country Differences in Household
Saving Rates and Social Benefit Ratios,” mimeo.

Hurd, Michael D. (1987), “Savings of Aged Households and Desired Bequests,”
American Economic Review 77, 298-312.

Hurd, Michael D. (1990), “Research on the Aged Households: Economics Status,
Retirement, and Consumption and Saving,” Journal of Economic Literature 28,565-637.

Kan, Mari, and Horioka, Charles Yuji (2010), “Chochiku・Shisan,” Shin Rounengaku(Tokyo: University of Tokyo Press) 3, 1731-1740, 1750-1752 (in Japanese).

National Bureau of Statistics of China (2008), ed., China Statistical Yearbook, 2006
edition.

http://www.stats.gov.cn/tjsj/ndsj/2006/indexch.htm

Ohtake, Fumio; and Horioka, Charles Yuji (1994), “Chochiku Douki (Saving Motives)”
in Tsuneo Ishikawa, ed., Nihon no Shotoku to Tomi no Bunpai (The Distribution ofIncome and Wealth in Japan) (Tokyo: University of Tokyo Press), pp. 211-244 (in- 41 -

Japanese).
Ohtake, Fumio; and Horioka, Charles Yuji (1995), “Saving Motives in Japan,”
Discussion Paper, The Institute of Social and Economic Research, Osaka University,
No. 392.
Stark, Oded (1995), Altruism and Beyond: An Economic Analysis of Transfers andExchanges within Families and Groups. Cambridge, U.K.: Cambridge University
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Yin, Ting (2010), “Parent-Child Co-residence and Bequest Motives in China,” China
Economic Review, forthcoming.
http://dx.doi.org/10.1016/j.chieco.2010.05.003- 42 -

W

Figure 1: Age-Wealth Profiles
Baltruism / dynasty
A

exchangeC
altruism / dynasty

Dselfish / exchange

selfish0

R

L

Figure 2: Age-Saving Profiles
SE

G altruism / dynastyF

H selfish / exchange

0RL
exchangeIJselfish/altruism- 43 -K

SampleVariable

Table 1: Descriptive Statistics for Dependent Variable and Explanatory Variables
Mean
Standard
Minimum
deviation

Maximum

Urban households
lnNW
12.8460.780
8.517
14.557NW
475423.600
314209.000
5000
2100000
lnFINA
10.752
1.001
8.517
13.305
FINA
63655.280
90416.990
0600000lnFIXA
12.7660.627
10.59714.509FIXA
411768.300
279753.600
02000000
ABEQUEST
0.333
0.472
0
1
SBEQUEST1
0.118
0.323
0
1
SBEQUEST2
0.033
0.178
0
1
DBEQUEST
0.069
0.254
0
1
UBEQUEST
0.321
0.468
0
1
ABA
21.25230.172
0
74
SBA1
7.740
21.253
0
74
SBA2
2.207
12.079
0
73
DBA
4.411
16.240
069
UBA20.75630.296073
INCOME
0.042
0.067
0
0.9
ADIFF
6.817
15.201-770
AGEH
64.533
3.466
60
78
EDUH
8.884
2.514
3
16
MARRY
0.939
0.240
0
1
RR
0.189
0.078
0.107
0.324
Rural households
lnNW
10.8261.140
6.908
12.713NW
79752.630
72407.400-21900332000lnFINA
9.019
1.262
4.605
11.408FINA
7450.000
13763.100-2990090000
lnFIXA
10.681
1.173
6.908
12.676
FIXA
72302.630
68792.800
1000
320000ABEQUEST
0.307
0.463
0
1
SBEQUEST1
0.079
0.271
0
1
SBEQUEST2
0.053
0.224
0
1
DBEQUEST
0.053
0.224
0
1
UBEQUEST
0.316
0.467
0
1
ABA
19.58829.619
0
71
SBA1
5.184
17.851
0
77
SBA2
3.281
13.985
0
64
DBA
3.228
13.758
0
63
UBA
20.13229.813070
INCOME
0.012
0.007
0
0.034
ADIFF
3.088
3.393
-2
15
AGEH
63.904
3.321
60
77
EDUH
4.421
3.071
0
12
MARRY
0.912
0.284
0
1
WORK
0.851
0.358
0
1
All households
lnNW
12.2101.306
6.908
14.557NW
350127.800
320933.100-219002100000
lnFINA
10.3331.301
4.605
13.305
FINA
45856.940
79525.500-29900600000lnFIXA12.0951.288
6.908
14.509FIXA
304270.800
282674.900
02000000
ABEQUEST
0.325
0.469
0
1
SBEQUEST1
0.106
0.308
0
1
SBEQUEST2
0.039
0.194
0
1
DBEQUEST
0.064
0.245
0
1
UBEQUEST
0.319
0.467
0
1
ABA
20.72529.966
0
74
SBA1
6.931
20.248
0
77
SBA2
2.547
12.703
0
73
DBA
4.036
15.488
0
69
UBA
20.55830.104
073
INCOME
0.032
0.057
0
0.9
ADIFF
5.636
12.819-770
AGEH
64.333
3.429
60
78
EDUH
7.471
3.406
0
16
MARRY
0.931
0.255
0
1
DRURAL
0.317
0.466
0
1
Note: INCOME is in units of 10,000,000 yuan.
Data Source: The data were taken from the China surveys of the “Survey of Living Preferences and Satisfaction,” which was conducted aspart of the 21st Century Center of Excellence (COE) Program of Osaka University (http://www2.econ.osaka-u.ac.jp/coe/).

- 44 -

Table 2: Bequest Motives and Aged Households' Assets Holding (Urban Sample）
Bequest Motive

Net Worth

Net Financial Assets

Net Fixed Assets

1. I plan to leave an inheritance to my child(ren)no matter what (ABEQUEST)

567,573.20 (82)

101,719.50 (82)465,853.70 (82)512,172.40 (29)54,586.21 (29)457,586.20 (29)721,250.00 (8)56,250.00 (8)665,000.00 (8)466,823.50 (17)52,705.88 (17)414,117.60 (17)401,407.60 (79)39,445.57 (79)361,962.00 (79)327,193.50 (31)41,064.52 (31)286,129.00 (31)475,423.60 (246)

63,655.28 (246)411,768.30 (246)

2. I plan to leave an inheritance to my child(ren) if
they provide care (including nursing care) during
old age (SBEQUEST1)
3．I plan to leave an inheritance to my child(ren)only if they provide financial assistance during
old age(SBEQUEST2)
4．I plan to leave an inheritance to my child(ren)only if they carry on the family business(DBEQUEST)
5．I do not plan to make special efforts to leavean inheritance to my child(ren) but will leave
whatever is left over (UBEQUEST)
6．I do not plan to leave an inheritance(NOBEQUEST)

Total

Bequest Motives and Aged Households' Assets Holding (Rural Sample）
Bequest Motive
1．I plan to leave an inheritance to my child(ren)no matter what (ABEQUEST)
2. I plan to leave an inheritance to my child(ren) if
they provide care (including nursing care) during
old age (SBEQUEST1)
3．I plan to leave an inheritance to my child(ren)only if they provide financial assistance during
old age(SBEQUEST2)
4．I plan to leave an inheritance to my child(ren)only if they carry on the family business(DBEQUEST)
5．I do not plan to make special efforts to leavean inheritance to my child(ren) but will leave
whatever is left over (UBEQUEST)
6．I do not plan to leave an inheritancet(NOBEQUEST)
Total

Net Worth

Net Financial Assets

Net Fixed Assets

74,922.860 (35)

9,951.429 (35)

64,971.430 (35)

50,444.440 (9)3,444.444 (9)47,000.000 (9)59,833.330 (6)7,666.667 (6)52,166.670 (6)65,166.670 (6)9,500.000 (6)55,666.670 (6)104,108.300 (36)8,136.111 (36)95,972.220 (36)68,981.820 (22)3,368.182 (22)65,613.640 (22)79,752.630 (114)7,450.000 (114)

72,302.630 (114)

Bequest Motives and Aged Households' Assets Holding (Pooled Sample）
Bequest Motive
1. I plan to leave an inheritance to my child(ren)no matter what (ABEQUEST)
2. I plan to leave an inheritance to my child(ren) if
they provide care (including nursing care) during
old age (SBEQUEST1)
3．I plan to leave an inheritance to my child(ren)only if they provide financial assistance during
old age(SBEQUEST2)
4．I plan to leave an inheritance to my child(ren)only if they carry on the family business(DBEQUEST)
5．I do not plan to make special efforts to leavean inheritance to my child(ren) but will leave
whatever is left over (UBEQUEST)
6．I do not plan to leave an inheritance(NOBEQUEST)

Net Worth

Net Financial Assets

Net Fixed Assets

420,199.10 (117)

74,267.52 (117)345,931.60 (117)402,815.80 (38)42,473.68 (38)360,342.10 (38)437,785.70 (14)35,428.57 (14)402,357.10 (14)362,043.50 (23)41,434.78 (23)

320,608.70 (23)308,340.00 (115)

29,644.35 (115)278,695.70 (115)

220,011.30 (53)25,416.98 (53)194,594.30 (53)350,127.80 (360)45,856.94 (360)304,270.80 (360)
Total
Note: The figures in parentheses show the number of observations, and the figures without parentheses show themean of three kinds of assets.

- 45 -

Table 3: Assets Holding by Age （Urban Sample)
Age Group
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65Total60-64 （Retired)
65- （Retired）
Total(Retired）

Net Worth

Net Financial Assets

Net Fixed Assets

452,732.4 (71)559,841.5 (82)576,990.3 (103)565,722.2 (135)508,811.6 (138)541,321.4 (140)
525,856.5 (154)555,727.3 (132)491,496.1 (155)
520,905.5 (254)
529,827.2 (1364)
467,313.0 (138)
485,787.0 (108)475,423.6 (246)62,521.13 (71)
121,243.90 (82)
95,922.33 (103)
81,529.63 (135)82,257.14 (140)
67,163.12 (141)
105,694.20 (154)87,858.21 (134)66,821.79 (156)
70,917.97 (256)82,275.95 (1372)
66,660.87 (138)59,814.81 (108)63,655.28 (246)

390,211.3 (71)438,597.6 (82)481,068.0 (103)484,676.5 (136)431,428.6 (140)473,678.6 (140)420,162.3 (154)483,204.6 (132)424,243.2 (155)451,386.7 (256)449,709.1 (1369)
400,652.2 (138)425,972.2 (108)411,768.3 (246)

Assets Holding by Age （Rural Sample)
Age Group
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65Total

Net Worth

Net Financial Assets

Net Fixed Assets

100,781.80 (66)
127,231.00 (100)118,207.20 (97)105,722.10 (131)103,168.80 (138)109,657.60 (99)100,186.20 (87)109,509.20 (109)
81,693.85 (65)85,850.93 (108)105,018.50 (1000)

17,903.030 (66)
18,681.000 (100)
12,702.060 (97)
12,622.900 (131)
11,183.330 (138)9,920.202 (99)13,473.560 (87)
13,059.630 (109)9,909.231 (65)7,512.963 (108)12,512.000 (1000)

82,878.79 (66)108,550.00 (100)105,505.20 (97)
93,099.24 (131)91,985.51 (138)
99,737.37 (99)86,712.64 (87)96,449.54 (109)
71,784.62 (65)
78,337.96 (108)92,506.50 (1000)

Assets Holding by Age （Pooled Sample)
Age Group
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65Total60-64 （Retired)
65- （Retired）
Total (Retired）

Net Worth

Net Financial Assets

Net Fixed Assets

283,179.6 (137)322,143.4 (182)354,480.5 (200)339,180.8 (266)
305,990.2 (276)362,515.1 (239)372,191.3 (241)353,910.8 (241)370,418.2 (220)391,110.2 (362)
350,128.1 (2364)
448,919.2 (146)
460,538.5 (117)454,088.2 (263)

41,026.28 (137)
64,890.66 (182)
55,560.50 (200)
47,594.36 (266)46,975.90 (278)43,550.42 (240)
72,402.90 (241)54,306.58 (243)50,082.81 (221)
52,105.49 (364)52,864.50 (2372)
63,782.19 (146)
55,743.59 (117)60,206.08 (263)242,153.3 (137)257,252.7 (182)298,920.0 (200)292,554.3 (267)262,928.1 (278)318,782.4 (239)299,788.4 (241)308,282.2 (241)320,107.7 (220)340,701.9 (364)298,927.1 (2369)
385,137.0 (146)404,794.9 (117)393,882.1 (264)Note: The figures in parentheses show the number of observations, and the figures
without parentheses show the mean of three kinds of assets.

- 46 -

Table 4: Determinants of Aged Households' Saving of Urban Households(1)
VARIABLES lnNW
ABEQUEST 0.627***(0.212)SBEQUEST1 0.466*(0.244)SBEQUEST2 0.709**(0.308)DBEQUEST 0.364(0.253)
UBEQUEST 0.305(0.218)HAGE
0.019(0.016)
ABA

(2)
lnNW

(3)
(1)
(2)
(3)
(1)
lnNW
lnFINA lnFINA lnFINA lnFIXA-2.256
0.668**
1.116
0.418***(2.797)(0.266)(3.955)(0.130)-0.291
0.283-8.816** 0.324**(3.717)(0.294)(4.467)(0.164)-9.111** 0.953***-10.410** 0.525**(4.308)(0.319)(4.250)(0.231)-0.5750.570*-2.5380.192(3.984)(0.315)(5.685)(0.201)-2.136
0.123-4.1120.154(2.542)(0.262)(4.009)(0.136)0.013-0.0130.015
0.008-0.0340.023**(0.017)(0.037)(0.022)(0.022)(0.055)(0.011)0.010*** 0.045
0.010** -0.007(0.003)(0.044)(0.004)(0.061)SBA10.007*
0.012
0.005
0.140**(0.004)(0.059)(0.004)(0.068)SBA2
0.011** 0.146**
0.015*** 0.167**(0.005)(0.066)(0.005)(0.065)
DBA
0.006
0.014
0.009*
0.048(0.004)(0.062)(0.005)(0.089)
UBA
0.005
0.038
0.002
0.066
(0.003)(0.041)(0.004)(0.061)
INCOME
1.495** 1.484** 1.498** 0.449
0.435
0.509
1.391**(0.705)(0.704)(0.705)(1.512)(1.521)(1.515)(0.555)
ADIFF-0.003-0.003-0.002-0.015-0.014-0.006-0.014(0.016)(0.016)(0.017)(0.018)(0.018)(0.019)(0.014)HEDU
0.047*** 0.047*** 0.047*** 0.060** 0.060** 0.056** 0.039***(0.017)(0.017)(0.018)(0.025)(0.025)(0.024)(0.015)MARRY-0.133-0.102-0.071-1.078-1.024-0.568-0.755(1.022)(1.026)(1.083)(1.184)(1.180)(1.234)(0.885)
RR
0.937
0.931
0.869
-1.064-1.090-1.234
1.539***(0.584)(0.584)(0.588)(0.848)(0.852)(0.842)(0.565)Constant
10.674*** 11.051*** 12.727*** 10.192*** 10.553*** 12.852*** 11.102***(1.063)(1.019)(2.046)(1.658)(1.614)(3.383)(0.967)
Observations 246
246
246
204
204
204
240
R-squared
0.141
0.143
0.154
0.121
0.120
0.156
0.171
F-stat
3.936
4.041
3.535
3.044
3.168
4.619
4.365
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1- 47 -(2)
lnFIXA(3)
lnFIXA
1.199(1.841)-0.469(2.731)-4.570(4.250)2.264(3.554)1.658(1.883)0.019*
0.031(0.012)(0.024)0.006*** -0.012(0.002)(0.029)0.005*
0.012(0.003)(0.043)0.008**
0.075(0.003)(0.064)0.003-0.032(0.003)(0.054)0.002-0.023(0.002)(0.029)1.386**
1.336**(0.555)(0.567)-0.013-0.012(0.014)(0.014)0.039*** 0.037**(0.015)(0.015)-0.741-0.671(0.885)(0.907)1.533*** 1.462**(0.564)(0.566)
11.351*** 10.539***(0.940)(1.462)
240
240
0.172
0.182
4.372
3.285

Table 5: Determinants of Aged Households' Saving of Rural Households
(3)
(1)
(2)
(3)
(1)
(2)
lnNW
lnFINAlnFINAlnFINAlnFIXAlnFIXA-1.506
0.894-11.493-0.183(6.431)(0.697)(11.529)(0.317)-6.1580.824-28.615*-0.119(6.193)(0.924)(16.868)(0.504)25.7130.974-40.811*** -0.467(30.158) (0.777)(9.771)(0.786)
10.492
0.480
3.994
0.232
(8.522)(0.775)(28.464)(0.316)-4.4760.593-16.366*
0.320(5.535)(0.652)(9.007)(0.291)-0.028-0.071-0.062-0.072-0.263*-0.013-0.013(0.030)(0.081)(0.047)(0.049)(0.149)(0.031)(0.031)-0.000
0.023
0.014
0.191
-0.003(0.005)(0.102)(0.011)(0.183)(0.005)
SBA1
0.000
0.094
0.013
0.462*-0.001(0.007)(0.096)(0.014)(0.269)(0.008)SBA2-0.008-0.4220.016
0.669***-0.008(0.013)(0.494)(0.012)(0.158)(0.013)DBA
0.004-0.1690.007-0.0730.004(0.005)(0.137)(0.012)(0.461)(0.005)
UBA
0.005
0.075
0.010
0.262*
0.005(0.005)(0.087)(0.010)(0.143)(0.005)
INCOME
44.997*** 45.227*** 48.158*** 55.654** 55.327**
53.803** 35.931**
36.226**(16.982) (16.915) (16.463) (23.363)(23.467)(24.528)(17.359)(17.306)
ADIFF-0.073** -0.074** -0.075** -0.137*-0.139*-0.156*-0.067**-0.067**(0.030)(0.030)(0.031)(0.081)(0.080)(0.088)(0.032)(0.032)
HEDU-0.026-0.026-0.029
0.049
0.050
0.061
-0.025-0.025(0.035)(0.035)(0.035)(0.039)(0.039)(0.041)(0.037)(0.037)
MARRY-0.219-0.215-0.222-0.082-0.0790.050-0.238-0.235(0.299)(0.298)(0.298)(0.537)(0.533)(0.514)(0.296)(0.295)
WORK-0.530** -0.524** -0.469* 0.076
0.075
0.187
-0.655**-0.647**(0.260)(0.259)(0.259)(0.360)(0.360)(0.371)(0.273)(0.272)
Constant
12.856*** 12.957*** 15.680*** 11.722*** 12.339*** 24.600** 12.151***
12.153***(2.038)(2.042)(5.332)(3.147)(3.258)(9.666)(2.107)(2.109)Observations 113
113
113
65
65
65
114
114
R-squared
0.233
0.235
0.265
0.319
0.321
0.373
0.211
0.211
F-stat
3.565
3.590
3.129
2.360
2.374
23.62
3.019
3.051
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1(1)
VARIABLES lnNW
ABEQUEST -0.024(0.314)SBEQUEST1 -0.004(0.440)SBEQUEST2 -0.489(0.821)DBEQUEST 0.267(0.301)UBEQUEST 0.339(0.294)HAGE-0.026(0.030)
ABA

(2)
lnNW

- 48 -(3)
lnFIXA-2.880(6.525)-6.386(6.045)24.291(29.178)
0.121(12.745)-4.421(5.552)-0.066(0.080)0.042(0.103)0.096(0.093)-0.399(0.478)-0.001(0.206)0.074(0.087)37.916**(17.025)-0.070**(0.033)-0.026(0.037)-0.234(0.298)-0.610**(0.277)15.508***(5.247)
114
0.235
2.159

Table 6: Determinants of Aged Households' Saving of All Households
(3)
(1)
(2)
(3)
(1)
(2)
lnNW
lnFINAlnFINAlnFINAlnFIXAlnFIXA-1.1390.735***
0.486
0.271*(2.801)(0.253)(3.587)(0.153)-1.1480.419-9.494**
0.192(3.345)(0.270)(3.833)(0.185)-8.138* 1.031***-7.109**0.282(4.907)(0.307)(3.607)(0.362)-0.0570.601**-5.7080.227(3.429)(0.297)(4.845)(0.184)-1.9160.300-4.7500.274*(2.614)(0.244)(3.318)(0.147)0.001-0.022-0.010-0.018-0.0660.010
0.007(0.014)(0.034)(0.018)(0.018)(0.045)(0.013)(0.013)0.007** 0.025
0.011*** 0.003
0.004*(0.003)(0.044)(0.004)(0.056)(0.002)
SBA1
0.005
0.022
0.007*
0.153***
0.003(0.003)(0.052)(0.004)(0.058)(0.003)SBA2
0.006
0.130*
0.016*** 0.124**
0.005(0.006)(0.073)(0.005)(0.054)(0.005)DBA
0.005*
0.006
0.010**
0.099
0.003(0.003)(0.054)(0.005)(0.076)(0.003)
UBA
0.006** 0.035
0.005
0.078
0.004*(0.003)(0.041)(0.004)(0.051)(0.002)
INCOME
1.557*
1.555*
1.582*
0.695
0.688
0.783
1.344*
1.347*(0.931)(0.930)(0.929)(1.694)(1.702)(1.690)(0.746)(0.745)
ADIFF-0.009-0.009-0.008-0.003-0.003-0.001-0.011*-0.011*(0.006)(0.006)(0.006)(0.008)(0.008)(0.008)(0.006)(0.006)HEDU
0.038** 0.038** 0.035** 0.067*** 0.066*** 0.065***
0.031*
0.031*(0.017)(0.017)(0.018)(0.021)(0.021)(0.021)(0.017)(0.017)MARRY-0.361-0.362-0.354-0.203-0.203-0.142-0.435-0.436(0.317)(0.318)(0.318)(0.403)(0.401)(0.389)(0.314)(0.314)DRURAl-1.819*** -1.820*** -1.805*** -1.437*** -1.438*** -1.368*** -1.938***-1.938***(0.143)(0.143)(0.145)(0.210)(0.209)(0.214)(0.134)(0.134)
Constant
12.107*** 12.440*** 13.958*** 10.520*** 11.021*** 14.070*** 12.030***
12.259***(0.942)(0.936)(2.169)(1.296)(1.287)(2.948)(0.884)(0.869)Observations 359
359
359
269
269
269
354
354
R-squared
0.546
0.546
0.551
0.395
0.395
0.415
0.594
0.594
F-stat
31.19
31.41
23.64
13.84
13.93
16.41
32.73
32.78
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1(1)
VARIABLES lnNW
ABEQUEST 0.452**(0.175)SBEQUEST1 0.298(0.200)SBEQUEST2 0.383(0.382)DBEQUEST 0.353*(0.200)UBEQUEST 0.361**(0.169)HAGE
0.006(0.014)
ABA

(2)
lnNW

- 49 -(3)
lnFIXA
0.956(2.400)-0.697(3.121)-5.379(4.781)
1.756(3.104)0.986(2.274)0.011(0.027)-0.011(0.038)0.014(0.048)0.086(0.071)-0.024(0.048)-0.011(0.035)1.322*(0.756)-0.010*(0.006)0.027(0.017)-0.430(0.317)-1.935***(0.137)
11.993***(1.780)
354
0.597
23.03