Discussion Paper No.346
The Impact of Bequest Motives
on the Saving Rate of Elderly Households：
A Comparative Study Between China and Japan
Cheng Tang
Chuo University
Faculty of Economics

Cheng Zhang
Shantou University
School of Business

March 2021

INSTITUTE OF ECONOMIC RESEARCH
Chuo University
Tokyo, Japan

The Impact of Bequest Motives on the Saving Rate of ElderlyHouseholds：A Comparative Study Between China and Japan

Cheng

Tanga

Cheng Zhangb

ABSTRACTThis study analyses the phenomenon of the high saving rate of Chinese elderly
households from the perspective of bequest motives based on the data of China Household
Finance Survey (CHFS). The result shows that, like Japan, the bequest motives of Chinese
elderly households have a significant positive effect on the family saving rate, especiallyon rural household savings, middle-wealth and low-wealth elderly households, those whosechildren work outside of the government system and those whose children with low
education levels, indicating that the bequest motives of Chinese elderly households are
more altruistic. This provides a new understanding of the high savings of Chinese elderly
households and can provide a reference for future policy making.
Keywords: Household saving, bequest motives; elderly households
JEL classification codes: D14, E21, D91

aFaculty of Economics, Chuo University,742-1 Higashi-nakano,Hachioji, Tokyo,1920393, Japan.
bSchool of Business, Shantou University, 243 Daxue Rd, Jinping District, Shantou,
Guangdong,515063, China

11. Introduction
Since China entered an aging society at the end of the twentieth century, thenumber and proportion of elderly people have continued to grow, affecting China's
economic development. According to the World Population Prospects Report (2019)1,
China's aging rate — the proportion of the population aged over 65 —continues toincrease and it will even exceed that of Japan (highest aging rate in the world) in the
future. Based on the Fund Flow Table of the National Bureau of Statistics2, as China's
aging degree has intensified, the household saving rate has slowly fallen from 42.1% in2010 to 36.2% in 2017. Even so, the household saving rate in China is still at a relatively
high level (Ma and Yi, 2010), and this trend seems to be in line with the life cycle theory:
family members save assets during work, while retirement reduces assets for
consumption, so the saving rate has an inverted U-shaped relationship with age(Modigliani and Brumberg, 1954). However, some studies argue that in China thehousehold saving rate is high both when householders are relative young and when they
are old after retirement, whereas it is low in the middle-aged period. The relationshipbetween age and the saving rate is roughly a U-shape (Chamon and Prasad, 2010;
Rosenzweig, Mark and Zhang, 2014). This phenomenon contradicts the life cycle theory.
So why does the saving rate of Chinese elderly households remain high? How does aging
affect China's household saving rate? Existing studies provided explanations such as life
expectancy extension (Zhang and Ma, 2019), population aging (Chen, Guo, and Yao,2014), and population structure (Ni, Li, and He, 2014). However, few literature haveanalysed the saving behaviour of elderly households based on micro data from theperspective of bequest motives.
Japan has many similarities with China in terms of economic growth, demographic
changes, and traditional cultural foundations, and it also has one of the highest household
2saving rates in the world. According to the micro-survey data of China and Japan (Figure1), the household saving rate in China exceeds that of Japan from age 55 and they bothshow an upward trend after age 65. By comparison, the saving rate of Chinese elderly
households is higher than that of employed Japanese. Why is the saving rate of "aging
before getting rich" in Chinese elderly households even higher than that of the wealthiest
counterpart in Japan? And does bequest motive also significantly affect the saving rate
of Chinese elderly households?
Figure 1: Saving Rate of Japan and China by age
45
40

41
36.7

35
30
25

36.8
31.1

28.43 27.58
22.15

20

33.4 32.4
30.35 31.25
25.75

24.17

27.39
24.17 23.6
22

18

15

SR in JapanSR in China

1050under 35-39 40-44 45-49 50-54 55-59 60-64 65-69 above
34
70
Note: SR=Saving Rate.
Source from : https://population.un.org/wpp.

Cai and Zhang (2020) examine the reasons for the high savings of Chinese elderly
households from the aspects of bequest motives, precautionary motive and time
preference based on the survey data of Beijing, Shanghai and other urban areas from 2009
to 2010 (effective sample number of 328 people). They believe bequest-motivatedfamilies have higher financial assets and fixed assets than those without bequestmotivated families.
This paper focuses on the bequest motives of China’s elderly households andintroduces a comparative analysis with Japan, so it can better explain the reasons for the3

saving behaviour of elderly households in China. Further, we analyse the influence ofdifferent elderly groups by combining micro-survey data for cross-validation, attempting
to explain the exceptionally high saving rate and understand the saving behaviour ofChina’s elderly households.
This study employs the latest China Household Financial Survey (CHFS) data fromfamily’s microscopic perspective. The latest CHFS data provide unique information on
explanation of China’s high saving rate. We not only compare the data between China
and Japan but discuss the impact of bequest motives on the saving rate of elderly
households from different groups, including urban and rural differences, different wealthlevels, different children's education levels and different children’s work types based onwhether they work within the government system or not.
The rest of the study is arranged as follows: Section2 reviews the extant literature;
Section 3 constructs econometric models, describes variables and analyses data; Section
4 analyses the empirical results; Section 5 is the heterogeneity analysis; Section 6 tests
the robustness; Section7 concludes and proposes some policy implications.

2. Literature Review
According to the standard life cycle theory, families increase savings during workand show smooth consumption after retirement, so the saving rate declines (Ando andModigliani, 1963). However, previous studies have found that the wealth declines slowly
after retirement, so the saving rate does not drop significantly (Alessie, Lusardi, andKapteyn, 1999; De Nardi et al., 2015). To find the reasons of this phenomenon, existing
literature mainly explains from three aspects: life expectancy uncertainty (Yaari, 1965;
De Nardi, French, and Jones, 2009; Cocco and Gomes, 2012; Post and Hanewald, 2013);
voluntary bequest motivation (Kopczuk and Lupton, 2007; Laitner, 2012; De Nardi andYang, 2014) and preventive saving motivation (De Nardi, French, and Jones, 2010;4

Dobrescu, 2015). Several papers are close to this paper in the sense that they associate
the bequest motives with saving rate. The bequest motives are classified into three
categories: egoist motivation, altruism motivation, and legacy motivation (Kopczuk andLupton, 2007; Horioka, 2014). First, egoist motive assumes that people are selfish,leaving no inheritance to children or only leaving it when the old understand theuncertainty of death and to children who respect and care about them responsibly (Hurd,
1989; Nardi and Yang, 2014). Second, altruistic motive is that people haveintergenerational altruism (family relationships) towards their children. According to thistheory, regardless of whether the children can inherit the family business or take care of
the elderly or not, parents will no doubt leave an inheritance to their children (Laitner,
2002). Third, the main point of legacy motivation is that parents want to continue thefamily business or family property and take actions to minimize the possibility of them
being destroyed. According to this theory, the inheritance will only be left to the children
who can manage the family property (Norton and Van Houtven, 2006; Alessie, Angelini,and Pasini, 2014).
Previous work on the savings rate of Japanese elderly households has been
conducted. After the elderly in Japan retire or stop working, according to the life cycle
theory, the income level declines relatively slowly (Horioka, 2010; Horioka and Niimi,
2017; Murata, 2019). Precautionary saving motives and bequest motives are the key
reasons of this slow downward trend. Whereas some scholars believe that the
precautionary motive plays an important role (Niimi and Horioka, 2018), others found it
could not fully explain the slow decline (Murata, 2018). Some studies suggest the family
wealth declines more gently within bequest-motived families (Horioka et al., 1996;
Horioka, 2002). However, research has not reached a consistent conclusion regarding theeffect of precautionary saving motives and bequest motives on the savings rate of elderly

5households. The individual property can be used not only for an inheritance to children,
but used for medical expenses, nursing expenses or other expenses (Dynan Skinner, andZeldes, 2002).
Only a handful studies examine the phenomenon of high savings of China’s elderly
households from the following aspects. First, the old-age pension reform has led to theuncertainty of households’ income, leading to an escalating in the saving rate of elderly
households (Chen, 2015). Second, the wealth effect brought by pension income will
promote a growth of saving rate (Liu and Chen, 2010). Third, the individual’s cognitive
consumption capability affects household spending power, which in turn affects thesaving rate (Li and Zhang, 2018). The empirical research on Chinese bequest motives
mainly emphasises two aspects. The first is the impact on household wealth and asset
portfolio. For example, Chen and Huang (2013) use the number of children and thenumber of core family members as proxy variables to examine the influence of bequest
motives on the house wealth effect. Kuang, Wang, and Ge (2018) measured bequest
motives by whether the family has multiple houses. It turns out that bequest motives push
up housing prices. Yang and Gan (2020) use the CHFS data to understand the influenceon urban household investment portfolios and wealth gaps. Yin (2012) focuses on theimpact of bequest motives on wealth accumulation in elderly households by adopting
micro-data from the Life Preference and Satisfaction Survey. Another important aspect
is associated with the support of the children. Jiang, Li, and Feldman (2015) study the
relationship between the support provided by children and their parents’ bequest motives
from the data of farmers in Anhui Province to. Yin (2010) analyses the relationshipbetween bequest motives and children's co-living, and finds that regardless of whether it
is urban or rural, the type of bequest motives in China is egoism.

6

Previous studies are predominantly on the perspectives of social security andpension insurance. They rarely shed light on the saving behaviour of elderly households
from bequest motives, especially by in-depth analysis based on national representative
data. Only Almås et al. (2020), referring to the urban and rural survey data of two
provinces in China, suggest that the level of children's assistance to parents significantly
affects how much inheritance is left to their children. For example, housing is an essential
part of the elderly households’ inheritance and is a significant saving reason for them. Cai
and Zhang (2020) also points out that bequest motives significantly increase household
financial assets and fixed assets by using China’s urban survey data.
This paper aimed to extend the literature from microscopic perspective to examine
the puzzle of high saving rate of elderly households. We first collected the latest NHFS
data, including not only urban households but a sample of rural households. Then weanalysed the impact of bequest motives on the saving rate of elderly households fromthree aspects: urban and rural areas, wealth accumulation, and differences in children’s
lives.

3. Model and variables
(1)

Model
In order to investigate the impact of bequest motive on household savings, thisstudy establishes the following econometric equation
Saving i = a0 + α1 ∗ Bequest_motivei + α2 Xi + μi

（1）where Savingi denotes the saving rate of household i’s. Bequest_motivei is thebequest motive of household i’s. Xi stands for the control variable, including

7

demographic characteristics variable, family characteristic variable and provincial
characteristic variable. 𝜇𝑖 is the residual error.

(2)

Data source and Variables
Data are obtained from the CHFS project conducted by Southwest University of

Finance and economics in 2015, 2017 and 2019, which investigated 29 provinces, cities
and autonomous regions except Xinjiang, Tibet, Hong Kong, Macao and Taiwan. The
data contains the following demographic characteristics: households, family wealth,
income, expenditure, insurance and employment information. The number of children,the types of insurance and the housing information are recorded in detail, which provides
reliable data for the study. The CHFS data is scientifically and randomly sampled, andthe survey data are representative with high quality (Gan Li et al., 2012). The main
variables are described below.


Saving rate.
In order to increase the robustness and reliability of the empirical results, we givetwo definitions of saving rate (dependent variables) based on the existing literature (Yinand Zhang, 2019). The formula of the first definition: the total household income in thecurrent year subtracts the household expenditure, and then divided by the householdincome. Household expenditure3 includes non-durable goods consumption such as food,daily necessities, communication expenses, cultural entertainment and transportation
expenses, as well as education and medical expenses; household income contains
property income, annual earning, transfer income and operating revenue. The expressionof saving rate 1 is as follows:
Saving1 = （household income − household expenditure）/(household income)8（2）

As education expenditure and medical expenditure are very contingent and sudden,
they have a strong rigidity for a family’s expenditure. Considering robustness, we thendefined the second household saving rate referring to Ma and Zhou (2014)’s study result.
The total household income minus the household’s regular consumption and divided by
the household income. The regular consumption of the family excludes the medical
expenditure and education expenditure. The expression of the saving rate 2 is as follows:𝑆aving2 =[household income−(household consumption−(medical expenses+educational expenditure))]household income（3）

In the process of empirical analysis, the main regression results are saving rate 1 andsaving rate 2.


Bequest motive
Combined with CHFS questionnaire survey data, we give three definitions tomeasure the bequest motive of elderly households. The first definition is to measure
whether the householder or spouse has life insurance (Tin, 2010). The households whose
householder or spouse with life insurance are assigned a value of one, while a value of 0
is assigned to those without any life insurance (i.e: with bequest motive= 1; 0 otherwise).
The second definition, using Chen and Huang (2003)’s method, measures the bequest
motive by the number of children in the family. With regard to this method, we took thepercentage of boys in a family as the measurement. The third definition tests whether thefamily has several houses or not (Kuang, Wang, and Ge, 2018). If the family has multiple
houses, the bequest motive is assigned a value of 1; otherwise, it is 0.
Control variables

9This paper selected the following control variables, including householder'sdemographic characteristic variables, family characteristic variables and provincial
characteristic variables. Demographic variables of householders include: age, educational
level, the CPC Party member or not, employed or unemployed, marital status, andregistered rural residents. Family characteristic variables contain family members’
participation in endowment insurance, family size, family business operation and family
total assets. Regional variables include provincial control variables.
This paper emphasises the influence of bequest motive on the saving rate of elderly
households. In data processing, we keep the sample of the householder aged 60 or above
and the family has at least one child. To avoid the effect of outliers, we remove thesamples whose total household income is less than or equal to 0, set the upper limit ofhousehold saving rate to 100%, and the lower limit to - 100%. Finally, the total numberof respondents is 12475.
Table 1. Descriptive Statistics.
Variable
Dependent Variable
SR1
SR2
Independent Variable
BM1
BM2
BM3
Control Variable
Householder’s age
Householder’s education
level
Family businessHouseholder (Party
Member)Householder (employed)
Householder (married)
Family size
Children (employed)
Number of childrenChildren’s education level

OV

Mean

S.D.

Min

Max

12475
12475

0.18280.37260.62780.6164

-1
-1

1
1

12475
12475
12475

0.03940.65950.20980.19450.42040.4072

0
0
0

1
1
1

12475
12475

67.0934
5.59796.0966
3.8772

60
0

99
19

12475
12475

0.12400.12260.3296
0.3280

0
0

1
1

12475
12475
12475
12475
12475
12475

0.27880.82544.75250.14371.52950.20420.44840.37961.70540.35080.85920.4031

0
0
2
0
1
0

1
1
19
1
10
1

10

Householder (registeredrural residents)
Householder (endowment
insurance participation)
Family assets (in 10,000
Yuan)

12475

0.40450.4908

0

1

12475

0.8426

0.3796

0

1

12475

97.69

178.8202830

Note: The data comes from the 2015, 2017 and 2019 China Household Finance Survey data. OV=observed value;
S.D.=standard deviation.

It can be seen from table 1 that the saving rate of China's elderly households is still
at a high level with the average value of saving rate 1 at 18.28% and saving rate 2 at
37.26%. The average bequest motive of elderly households was 0.0394, 0.6595 and0.2098 respectively by three definitions. The average age of the householder is 67.09
years old, but the average years of education is only 5.6 years, which means the educationlevel of the elderly in China is relatively low. The proportion of employed householder
is 27.88%, indicating that some elderly groups continue to choose work after retirement.
The percentage of married householders was 82.54% while that of rural families was
40.45%. The control variables of family characteristics show that 12.40% of the families
run business. The average number of family members is between 4 and 5 (4.75) whereas
the number of children in a family is between 1 and 2(1.53). The rate of elderly
households joining in endowment insurant is high (83.26%). The percentages of children
with formal work and those with higher education level are low at 14.37% and 20.42%.

Table 2. Household Saving Rate.
High-BM
SR1
SR2

BM1
0.30840.4549BM2
0.22680.4066

Low-BMBM 3
0.31380.4624BM 1
0.17770.3695BM 2
0.12620.3292BM 3
0.14800.3488

Note: SR=Saving Rate; BM= Bequest Motive.

Furthermore, this paper explores the general situation of household saving rate ofdifferent bequest motives. It can be seen from table 2 that both SR1 and SR2 show saving
11

rate of high bequest motive is higher than that of low bequest motive. Taking saving rate
2 and bequest motive 2 as examples, the saving rate of high bequest motive families was
40.66%, which was higher than that of low bequest motive families (32.92%), with adifference of 7.74%.

4. Estimation Result(1) benchmark regression
First of all, this paper analyses the impact of bequest motive on the savings
behaviour of Chinese elderly households. The estimation results illustrate strong positive
relationship between bequest motives and elderly household saving rate (Table 3).
Table 3. The Impact of Bequest Motives on the Saving Rate of Chinese Older
Households.

BM1

(1)
SR1
0.0675***(0.0236)(2)
SR20.0423*(0.0228)

BM2

(3)
SR1

0.0959***(0.0130)

(4)
SR2

(5)
SR1

(6)
SR2

-0.0083(0.0144)

0.1157***(0.0127)-0.0309**(0.0147)0.0775***(0.0121)-0.0071(0.0143)0.0085(0.0101)0.0107***(0.0019)0.0027**(0.0103)
0.0136***(0.0019)0.0078(0.0100)
0.0096***(0.0019)-0.0554***(0.0167)-0.0421**(0.0170)0.0311**(0.0150)
0.0026(0.0145)0.0536***(0.0155)
0.1049***(0.1071)
0.0280***(0.0038)

0.0511***(0.0156)
0.0323**(0.0149)
0.0434***(0.0157)
0.1020***(0.0172)
0.0250***(0.0039)0.0593***(0.0167)
0.0288*(0.0150)
0.0053(0.0145)0.0521***(0.0155)
0.1014***(0.0170)0.0262***(0.0039)0.0686***(0.0128)

BM3
Household’s
age-0.0298**(0.0148)-0.0064(0.0144)

Age squared/100
Householder’s
education
level
Familybusiness

0.0219**(0.0104)
0.0146***(0.0019)0.0072(0.0101)0.0103***(0.0019)-0.0332*(0.0171)-0.0533***(0.0167)

Householder(Party ember)Householder’soccupation
Householder(married)

0.0549***(0.0156)
0.0304**(0.0149)
0.0450***(0.0157)
0.1055***(0.0173)
0.0280***(0.0039)0.0313**(0.0150)
0.0040(0.0145)0.0532***(0.0155)
0.1038***(0.0171)
0.0282***(0.0039)

Endowment
insurance joined

Family size

0.0325**(0.0148)0.0238**(0.0104)
0.0152***(0.0019)0.0361**(0.0170)0.0546***(0.0156)
0.0284*(0.0149)
0.0456***(0.0157)
0.1072***(0.0173)
0.0277***(0.0039)12

Householder(registeredrural esidents)
Provincial
controlTime
controlN
R-square-0.0862***(0.0130)-0.0436***(0.0126)-0.0907***(0.0129)-0.0468***(0.0126)-0.0854***(0.0129)-0.0430***(0.0126)

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

12453
0.081

12453
0.102

12453
0.085

12453
0.104

12453
0.086

12453
0.105

Note： *, ** and *** are significant at the levels of 10%, 5% and 1%, respectively; heteroscedasticity robust
standard error is in ( ). BM=bequest motive , SR=saving rate.

In table 3, Column (1) and Column (2), by the first definition, measure whether thehouseholder or spouse have life insurance. The estimation results in column (1) show theestimated coefficient of bequest motive to the elderly household saving rate 1 (SR1) is0.0675, which is significant at 1%. We redefine the household saving rate 2 (SR2) inorder to prevent the impact of accidental expenditure on education and health care. The
results of column (2) reveal significant and positive coefficient (0.0423) but has relative
weak explanatory power (at 10% significant level). Second, column (3) and column (4)are the regression results of the definition accessed by the proportion of boys in the family.
The estimated coefficients are 0.0959 and 0.0686 respectively, which demonstrate stronglink between bequest motives and saving rate (significant level=1%). Third, we used
whether the family owns more than one house to measure bequest motives. The results
also indicate that bequest motives have a strong positive effect on the elderly householdsaving rate, with the estimated coefficients of column 5 at 0.1157 and column 6 at 0.0775.
With regard to control variables, the significance of the estimation results fromcolumn (1) to column (6) is basically consistent. In order to avoid repetition, we focus on
the estimation results of column (1). The householder’s age effect on the family savingrate presents a U-shape relationship, which is consistent with Chamon and Prasad(2010)’s conclusion. The higher the level of education (years of education), the stronger
the precautionary saving motive, thereby increasing the household saving rate (Z. Zhang
and M. Zhang, 2016). Other stimulations include: employed householder, married

13

householder and family size. On the other hand, the household management of industry
and Commerce significantly inhibited the household savings rate as the household needs
more cash investment to run business and industry. Similarly, compared with urban areas,
the income level of rural households is lower, which restrains the growth of elderly
household’s saving rate. An interesting finding is the participation of endowment
insurance did not significantly shrink the household saving rate, but increased it. This isbecause residents still lack a sense of security in participating in the endowment insurance
since the current pension system fails to provide good protection, and the pension
insurance of social pooling mode accounts for a large degree of household consumption(Zhao, Wang and Liu, 2017).
Besides, we analyse the impact of bequest motives on the saving rate of Japaneseelderly households. The estimation results by the two definitions of bequest motives areshown in Table 4.
Table 4. The Impact of Bequest Motives on the Saving Rate of Japanese Older
Households.

BM1

(1)

(2)

(3)

(4)

SR1
0.0482**(0.0227)SR2
0.0456*(0.0275)

SR1

SR20.0299***(0.0115)

0.0237*(0.0138)

BM2
Householder’scharacter
control
Family’s
character
controlTime control
N
R2

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes
1464
0.048

Yes
1370
0.036

Yes
1408
0.051

Yes
1325
0.037

Note: *, ** and *** are significant at the levels of 10%, 5% and 1%, respectively; heteroscedasticity robust standard
errors are in ( ). BM=bequest motive, SR=saving rate.

14

The data are from the Household Finance Survey of the Japan Postal Savings
Consortium in 2013, 2015 and 20184. The questions are directly linked to bequest motives.
For instance, question 35 asked the family "under what circumstances will the inheritancebe left to the children?" Respondents have the following options: “1. I would leave theinheritance under no circumstances; 2. I would leave the inheritance only when children
take about of me. 3. I would leave the inheritance when a child can inherit the familybusiness; 4. I will not actively leave an inheritance; 5. Others; 6. I do not want to leavean inheritance." (p17). The definitions of bequest motives are based on these questions
while bequest motive 1 is defined as dummy variables. If the householder answers 1, thenthe value of bequest motive is 1; otherwise, it is 0; the value of heritage motivation 2 isassigned accordingly. If respondents choose answer 1, the bequest motive is assigned avalue of 3.The bequest motive is assigned a value of 2 when respondents choose answer
2 and 3, while other situations are assigned a value of 1. The estimated results in Table 4
show that the estimated coefficients by the two definitions of bequest motives are bothsignificantly positive within the statistical level of 10%, indicating that the bequest
motives positively affects the saving rate of Japanese elderly households. In other words,
the empirical findings of micro-data from both China and Japan make clear that bequest
motives have positive effect on the saving rate of elderly households.

(2) instrumental variable estimation
The existing of endogenous bias in the benchmark results is due to two reasons: The
first is the reverse causality, which means the family saving rate may in turn affect theindividual's bequest motives: the higher the household saving rate, the stronger theindividual's motivation to leave legacy for their children. Second, there may be missing
variables that affect both bequest motives and household saving rate. In order to solve

15

Table 5. The Impact of Bequest Motives on the Saving Rate of Older Households(instrumental variable method).

BM1

(1)
SR1

(2)
SR2

0.1549***(0.0532)

0.1047**(0.0509)

BM2

(3)
SR1

(4)
SR2

0.0578**(0.0275)

0.0084(0.0267)

BM3
Householder’scharacter
control
Familycharacter
controlTime control
N
R-squareF Value offirst stage
Instrumental
variable
value
DWH
test
Chi2
(P-value)

(5)
SR1

(6)
SR2

0.1339***(0.0240)
Yes

Yes

Yes

Yes

Yes

0.1667***(0.0250)
Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes
12453
0.0806
17.07

Yes
12453
0.1021
17.07

Yes
12453
0.0841
174.99Yes
12453
0.1027174.99Yes
12453
0.0852152.17

Yes
12453
0.1034152.17

25.90

25.90

73.49

73.49

72.01

72.01

3.465
(0.0627)

1.936(0.1642)2.461(0.1167)

6.608(0.0102)

5.503(0.0190)

7.3625(0.0067)

Note: *, ** and *** are significant at the levels of 10%, 5% and 1%, respectively; heteroscedasticity robust standard
errors are in ( ). BM=bequest motive, SR=saving rate.

the problems, we selected the average bequest motive of the elderly households in thesame community as the tool variable of the family bequest motives, and estimated themodel by two-stage least squares method.
Table 5 is the estimation results of instrumental variable method. Columns (1) (2),Columns (3) (4) and Columns (5) (6) are estimated results of the three definitions ofbequest motives. The endogenous test of Durbin-Wu-Hausan bequest motive is reported
at the bottom. To avoid duplication, we took the estimation results of column (1) andcolumn (2) as examples for analysis. The P values of DWH test are 0.0627 and 0.1642
respectively and the results of column (1) and (2) both show that the model does not haveendogenous problems and significant at the 10% level. The regression results of first stage

16

reveals that the influence of community average bequest motive on bequest motives was
significant with coefficient at the 1% level, and the F value of the first stage was greaterthan 16.38 , which is the critical value (Hausman, Stock, and Yogo, 2005). So it isappropriate to use the community mean value as the instrumental variable of individual
bequest motives, and there is no weak instrument selection problem. Results show thatthe estimated coefficients of bequest motives are significantly positive at the statisticallevel of 1% and 5%, and the coefficients are 0.1549 and 0.1047 respectively. From
Column (3) to Column (6), only the estimation result of column (4) is not significant,while the rest columns are significant within the 5% level. The above regression results
further identified the positive and significant relation between individual bequest motives
and the saving rate of elderly household.

(3) propensity score matching estimation result
Personal choices and preferences are determinants of individual’s bequest motives,
so there may be sample selection problems in benchmark model estimation. Thus, wechose the propensity score matching (PSM) to modify the benchmark model. The kernel
matching (1:2) is chose to re-estimate and the estimation results (Table 6). To ensure thereasonableness of the matching results, we tested whether the control variables arebalanced before and after matching, and whether the mean values are still significantly
different between the experimental group and the control group. The results show that thecontrol variables passed the balance test, indicating that the model in this paper is suitablefor estimation using this method. The PSM estimation results in Table 6 show thatwhether saving rate 1 or saving rate 2 is used as the explained variable, the ATT values
by different bequest motive definitions are statistically significant at the 10% level. The
estimation results of PSM further confirm that bequest motives can significantly increase
the saving rate of elderly households.
17

Table 6. Matching Estimation Result.
Independe
nt variable

Dependent variable

BM1

BM2

BM3

Experiment
al groupContr
ol group

ATT

Standard errorTvalueSR1

0.31190.45660.1343***0.0612**0.0289SR2
SR10.21850.3959SR1

0.3136SR2

0.46190.0596***0.0393***0.1183***0.0796***0.0126

SR2

0.177
6
0.395
4
0.158
9
0.356
6
0.195
4
0.382
2

4.6
4
2.5
5
4.7
4
3.1
7
8.8
6
6.1
6

0.02410.01240.01330.0129Note: *, ** and *** are significant at the levels of 10%, 5% and 1%, respectively; heteroscedasticity robust standard
errors are in ( ). BM=bequest motive, SR=saving rate.

5. Further Analysis
Is there any significant difference in the impact of bequest motives on the householdsaving rate of different elderly groups? The following section will analyse from three
aspects: urban and rural areas, different levels of wealth accumulation and children's
living conditions.
(1)The influence of bequest motives on the saving rate of urban and rural elderly
households
With the development of social support for the aged, although the ways to care about
the old have shown a trend of diversity, child-support is still the most ideal way (Congand Silverstein, 2011). In rural areas of China, the tradition of “to raise children to carefor you when you get old” is prevalent. For example, Jiang, Li, and Feldman (2015)’s
study shows that children play a leading role in providing for the aged in rural families.
The rural children's support mode is easy to build intergenerational bonds and enhancethe emotional exchanges among family members, which may lead the elderly more
motivated to leave a legacy for their children, thereby increasing the family's saving rate.
18

For urban elderly households, on the other hand, the social pension mode is diverse, so
the senior citizen’s lives are splendid and full of variety. To a certain extent, this canreplace their children in providing for the elderly, and can weaken the emotional
dependence of the elderly to their children.
Table 7 demonstrate that the saving rate of rural elderly households is affected moreby the bequest motives than urban areas. Columns (1) and (2) are the estimated results by
the two definitions of saving rate. The regression coefficients of bequest motives and rural
cross terms are 0.1450 and 0.1844 respectively, which are both significant at the 1% level.
One explanation is, compared with urban areas, rural elderly households mainly rely onchild-support, and they have a strong motive to save for their children; another reason isthat rural areas have lower income levels, and the elderly may worry about their children's
future life to save.

Table 7. The Influence of Bequest Motives on the Saving Rate of Urban and Rural
Elderly Households.

BM
BM in rural area
Rural area
Householder’s character
control
Family’s character control
Provincial control
Time control
N
R-square(1)
SR1
0.01840.1450***(0.0288)-0.1461***(0.0243)
Yes

(2)
SR2
0.03210.1844***(0.0290)-0.2170***(0.0242)
Yes

Yes
Yes
Yes
12453
0.106

Yes
Yes
Yes
12453
0.088

Note: *, ** and *** are significant at the levels of 10%, 5% and 1%, respectively; heteroscedasticity robust standard
errors are in ( ). BM=bequest motive, SR=saving rate.

19

(2) Influence of bequest motives on the saving rate of elderly households withdifferent wealth levels
Are there significant differences in the household saving rate for the elderly withdifferent wealth levels? In this study, we define families with wealth levels higher than75 percentile are high-wealth families; low-wealth families refers to the wealth level islower than 25 percentile and the middle part is the middle-wealth families. We use highwealth families as the reference group to estimate the influence of bequest motives on thesaving rate of different wealth families (table 8). Results show that compared with highwealth families, the bequest motives significantly promote the saving rate of low-wealthand middle-wealth families both at 1% significant level. Specifically, the estimatedcoefficients of the cross-term between bequest motives and low-wealth families are
0.1220 and 0.0764, while that of middle-wealth families are 0.0698 and 0.0625. Therefore,
low-wealth and middle-wealth households show the characteristics of "old before gettingrich", and they would save to accumulate wealth.
Table 8 The Impact of Bequest Motives on the Saving Rate of Older Households(From Wealth Accumulation Perspective).

BM
BM*Low-income
householdBM*middle-income
household
Low-income household
Middle-income household
Householder’s character
control
Family’s character control
Provincial control
Time control
N
R-square(1)
SR1
0.0305(0.0199)
0.1220***(0.0353)
0.0698***(0.0270)-0.2878***(0.0298)-0.1464***(0.0225)
Yes

(2)
SR2
0.0188(0.0192)
0.0764**(0.0351)
0.0625**(0.0264)-0.1649***(0.0297)-0.1030***(0.0220)
Yes

Yes
Yes
Yes
12453
0.095

Yes
Yes
Yes
12453
0.108

Note: *, ** and *** are significant at the levels of 10%, 5% and 1%, respectively; heteroscedasticity robust standard
errors are in ( ). BM=bequest motive, SR=saving rate.

20

(3) The Influence of Bequest Motives on the Saving Rate of Elderly Households withDifferent Children's Living Conditions

For families with different children's living conditions, is there any difference in theimpact of the bequest motives on the savings rate? Previous studies have found thatparents have intergenerational altruistic motives (kinship and blood relationship) for theirchildren. Altruistic motives believe parents will leave an inheritance to their children
under any conditions (Laitner, 2002). Their bequest motives will be further enhanced
especially when the elderly anticipate the decline trend of their children's living standards,
thereby increasing the savings rate (Hamaaki and Hori, 2019). This study further uses
empirical analysis to test. Although the CHFS data does not directly involve the futureliving conditions of the children’s family, we can use the type of work and the educationlevel of children to indirectly measure it. Children’s work is classified into two types:
work within the government system and outside of the government systems. If thechildren’s organization is not in government agencies, public institutions, or statecontrolled enterprises, it will be assigned a value of 1, otherwise it will be 0. Likewise, if
the education level is low at the junior college level or below, the value is 1; otherwise, it
is 0. Traditionally, parents believe that children working outside of the government
system lack social security and stability. Under this condition, the bequest motives will
improve the savings rate. Similarly, the education level affects employment level, income
level and the future living conditions. Parents’ concerning about children’s future life
leads to the growth of the savings of elderly households whose children have low
education level. Next, we will use CHFS micro data for analysis.

21

Table 9. Influence of bequest motives on household savings rate (children’s work andeducation level).

BM
BM* Children
working outside of thegovernment system
Children working
outside of thegovernment system
BM* Children’s low
level of education
Children’s low levelof education
Householder’scharacter control
Family’s character
control
Provincial control
Time control
N
R-square(1)
SR1
0.0192(0.0235)
0.0765***(0.0276)(2)
SR20.0172(0.0228)0.0509*(0.0269)-0.2513***(0.0222)-0.1744***(0.0219)(3)
SR10.0268(0.0202)(4)SR20.0131(0.0194)

0.0775***(0.0248)-0.1736***(0.0201)
Yes

Yes

Yes

0.0969***(0.0256)-0.2294***(0.0207)
Yes

Yes

Yes

Yes

Yes

Yes
Yes
12453
0.093

Yes
Yes
12453
0.107

Yes
Yes
12453
0.092

Yes
Yes
12453
0.107

Note: *, ** and *** are significant at the levels of 10%, 5% and 1%, respectively; heteroscedasticity robust standard
errors are in ( ). BM=bequest motive, SR=saving rate.

Columns (1) and (2) of Table 9 examine the influence from the perspective ofchildren with different types of work. The cross-term coefficients of bequest motives andchildren's work outside of the government system are 0.0765 and 0.0509 respectively,
which are both significant at the 1% statistical level. The results show that bequest
motives significantly increase the saving rate of elderly households with children working
outside of the government system. Similarly, Columns (3) and (4) are from different
education levels and the estimated coefficients of the cross-term between bequest motives
and children's low educational level are 0.0969 and 0.0775 (significant at the 1% level).
The results also show that the bequest motives mainly significantly increase the savingrate of elderly households with lower education level of their children.
The above results show that the bequest motives’ positive effect on the saving rateof elderly households is mainly reflected in rural areas owing to the parents’ concerns
22about the future living standards of their children. Altruistic bequest motives can explain
this especially with elderly households whose children working outside of thegovernment system and children with low education levels.

6. Robustness CheckWe performed a robustness test with respect to sample and estimation method tocheck the previous results. (1).The sample robustness test. We used the 2015 Shanxi
survey questionnaire data, which directly measured the bequest motives, to re-verify the
regression results. In the questionnaire, we defined bequest motives as a dummy variable.
As for the question "what is the purpose of saving?”, the answer "to leave an inheritancefor your children or to marry your children" is assigned a value of 1, otherwise it is 0.

Table 10. The Impact of Bequest Motives on the Saving Rate of Older Households.
Based on Shanxi survey data analysis

BM
Householder’scharacter control
Family’s character
control
N
R2

(1)
SR1
0.1834***(0.0370)(2)SR20.2117***(0.0426)

Yes

Yes

Yes

Yes

671
0.106

671
0.105

Note: *, ** and *** are significant at the levels of 10%, 5% and 1%, respectively; heteroscedasticity robust standard
errors are in ( ). BM=bequest motive, SR=saving rate.

Based on Shanxi survey data, it was found that the estimated coefficient of bequest
motives is significant at the 1% level. The regression results in Table 6 show that bequest
motives significantly increases the household saving rate, which proves that thebenchmark results in this paper are robust.

23

(2).The robustness test of the estimation method. In the benchmark regression
results, this paper sets the upper and lower limits of the saving rate value to 1 and -1.
Although only a small part of the extreme sample values are merged into the upper andlower limits, to prevent the estimation results from being biased, this paper further uses
the Tobit model to re-estimate.

Table 11. The Impact of Bequest Motives on the Saving Rate of Older Households(Tobit).
Tobit
Estimator
BM1

(1)

(2)

(3)

(4)

(5)

(6)

SR1
0.0402***(0.0200)

SR2
0.0232(0.019
4)

SR1

SR2

SR1

SR2

0.0732***(0.0096)0.0485***(0.0092)
0.0563***(0.0094)
Yes

BM2

BM3

Householder/ Family
character
control
Provincial
controlTime
controlN
Pseudo R2

Yes

Yes

Yes

Yes

0.0886***(0.0097)
Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

12453
0.055

12453
0.089

12453
0.058

12453
0.091

12453
0.060

12453
0.091

Note: *, ** and *** are significant at the levels of 10%, 5% and 1%, respectively; heteroscedasticity robust standard
errors are in ( ). BM=bequest motive, SR=saving rate.

Table 11 demonstrates the estimated results of the Tobit model. Except for column(2), the regression coefficients of bequest motive on saving rate 1 and saving rate 2 areall positive at the statistical level of 1%. This confirms the bequest motives strongly andpositively promotes the saving rate of elderly households, which further illustrates thereliability of the results of the study.

24

7. Conclusions
This study mainly explores the determinants of the high saving rate of elderly
households from the perspective of bequest motives using the latest CHFS data andJapan’s postal savings data. In order to overcome the bias caused by the endogenous
problem on the estimation results, we selected the mean value of the individual bequest
motive of the same community as the instrumental variable of the family bequest motive
and the PSM method to re-estimate the benchmark model.
The followings are the empirical results: In the case of controlling demographic
characteristics, family characteristics, and provincial characteristics, the individual
bequest motives significantly increases the saving rate of elderly households. The
estimated result is basically unchanged and reliable after considering endogeneity and therobustness section. Firstly, the bequest motives affect the saving rate of rural elderly
households greater than urban counterparts. One reason is rural old people mainly dependon their children's support, and have a strong bequest motive to save for their children.
For another, rural economy is under-developed and households have low income levels,and the old generation save for their children's better economic life in future. The second
result, similarly, is associated with wealth levels, which reveal that low- and middlewealth families with bequest motives would have high saving rate for children. This canbe explained by the characteristics of "getting old before getting rich", so these families
have a stronger bequest motive to save to accumulate wealth. Thirdly, the strong positiveeffect of bequest motives on saving rate is reflected on households whose children workoutside of the government system and whose children have low education level, as theold parents worry about their children’s future living standards.
Currently, why the saving rate of the elderly population remains high? On the one
hand, the proportion of the elderly population in China continues to increase, and the25

problems caused by aging tend to be prominent. On the other hand, the high savings ofelderly households have caused insufficient consumption demand of residents, which
restricts the current economic transformation and development of China. On the basis of
the research results, the followings are the main policy implications. For elderly
households in rural areas, relevant departments should improve their social security levels
and promote the socialization of the elderly, so that the elderly can feel at ease in theirold age, weaken their bequest motive, and thus stimulate consumption. In addition,
considering the strong altruistic bequest motives, it is essential to maintain economic
growth, to broaden employment channels, and to strengthen employment security;
thereby alleviating the elderly’s concerns about their children’s future life and reducing
the family saving rate. In the future, further study would learn from the experience ofJapan and properly levy inheritance taxes to relieve the positive effect of bequest motiveon the savings of elderly households.

Notes:
1 .

According

to

data

releasedbythe

National

Bureauof

Statistics(http://www.stats.gov.cn/english/PressRelease/202002/t20200228_1728917.html),

from2000 to 2019, China’s population of elderly people aged 65 and above increased from 88
million to 176 million people, the proportion of the elderly in the total population rose from
9.9% to 12.6%.
2. Accessed from http://data.stats.gov.cn/english/
3 . According to the CHFS CAPI Questionnaire （ 2017 ） Part4 pp325, household
consumption mainly includes the following items. For example, food expenses include foodexpenses, tobacco and alcoholic beverage expenses; daily living expenses, water, electricity,
fuel, heating, property management expenses; daily necessities expenses, laundry supplies,
washing tools, handmade supplies, toilet paper and bedding textiles etc.; communication
expenses, telephone expenses, mobile phone expenses, cable TV expenses and Internet
expenses; cultural and entertainment expenses, books and newspaper expenses, movie

26

expenses, bars, Internet cafes, pets, playgrounds, art equipment, sporting goods, travel andfitness expenses; beauty expenses, including cosmetic surgery, purchase of skin careproducts, cosmetics, beauty treatments; local transportation expenses, subway fees, bus
fares, taxi and online taxi fares, various expenses for self-driving cars (gas, parking,
maintenance fees) , Tolls, etc., but do not include self-driving tours for tourism purposes);purchases of clothing expenses; housing maintenance expenses (excluding expenses for
improving housing performance and structure, and expanding housing area); education
expenses and medical expenses.
4. The Japan Postal Savings Foundation conducted a nationwide survey on the savings
behaviour of 5,000 households with more than two people in 2013, 2015 and 2018. The
recovery rate was stabilized at about 40% each time, and the two-stage stratified random
sampling method was adopted.

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