Silviase/jgov_v1.4_full_ann huggingface dataset:
dummies no longer represent the effect of parental strategic behavior, since parents do not play a role in bequest division negotiations in secondary inheritances unless decedents die testate. Since in practice dying testate is rare in Japan, we do not regard these two variables in the secondary inheritance regressions as testing whether parents behave strategically, but as variables regarding family values shared by the heirs (children). Therefore, when examining secondary inheritances, we classify the cohabitation and financial assistance dummies into the “other motives” category.

Finally, we add the following three variables to consider other possible factors: (1) a dummy for respondents who had a better relationship with their parents than other siblings (intersected with the siblings dummy), (2) a dummy for those who paid taxes when they received inherited assets, and (3) a dummy for affluent parents. The first variable takes one if respondents report that they had a better relationship with their parents than their sibling(s). If the division of bequests is influenced by heirs' relationship with their parents (compared to their siblings), we expect the marginal effect of this dummy to be positive. The latter two variables are included to investigate whether heirs had an incentive to reduce inheritance tax payments by adjusting the bequest allocation in the primary inheritance. The dummy for the tax payment takes one if the inherited assets were subject to inheritance tax. Meanwhile, the dummy to capture the affluence of respondents' parents is constructed based on respondents' subjective answer to a question about their parents' living standard when the respondents were children. The dummy variable takes one for respondents that chose the highest category (“Very wealthy”) regarding their parents' living standard during their (respondents') childhood (compared to that of the average family) among seven categories (from “Very poor” to “Very wealthy”). If the bequest amount is large enough to be subject to inheritance tax, we expect that respondents' share deviates upward from the statutory share (and surviving spouses' share deviates downward), since this should allow such heirs to reduce their tax liabilities. Therefore, the effects of those two dummies are expected to be positive.

As mentioned previously, we run regression (1) separately for primary inheritance observations and secondary inheritance observations. In the secondary inheritance regression, we exclude some of the altruism-related dummies, the dummy for living with the surviving parent, and the tax incentive-related dummies from our specification, because in secondary inheritances there is no room for parental altruism to play a role, no surviving parent to live with, and no room to reduce tax liabilities. Moreover, in the secondary inheritance regressions we do not use observations for only children, since in secondary inheritances the division of bequests in only-child families is unlikely to deviate from the statutory share (100 percent). $ ^{18} $

### 5. Empirical results
### 5.1 Determinants of bequest division in primary inheritances

We start by examining the determinants of the deviation of respondents' (or their spouse's) actual share in primary inheritances from their statutory share. $ ^{19} $ As a surviving spouse has the opportunity to express his/her views in the division of the bequests, it is likely that the patterns of bequest division in primary inheritances provide a clearer reflection of parental bequest motives than secondary inheritances.

The estimated marginal effects (coefficients) based on the Tobit as well as OLS regressions are reported in Table 4. We employ two different specifications, one with and one without age dummies for the surviving parent (columns A to D). Since the information necessary for constructing the surviving parent age dummies is often missing, the sample size is substantially reduced when we run the regressions with these dummies. Therefore, to ensure that the calculated effects do not result from the small number of observations, we report the results with specifications with and without the surviving parent age dummies.

The estimated marginal effects indicate that a variety of bequest motives, such as dynastic and strategic motives, have a significant impact on the division of bequests among heirs. Moreover, results appear to hardly change regardless of the estimation method employed (Tobit or OLS) or choice of specification (with or without the surviving parent age dummies). In addition, to further confirm the robustness of our findings, we ran regressions using observations for which the sum of bequest shares of individual heirs (i.e., the respondent, the surviving parent, other siblings, and other heirs) equaled 100 percent (see the right half of Table 4). Our findings remain unchanged even when we focus on these “cleaner” observations.

Looking at the dynastic motive, the estimated effects of the gender quasi-dummy indicate that, in Japan, males receive larger bequests from their parents than females. This suggests that the traditional family system with an emphasis on the male line still appears to have an influence on the division of bequests. While the coefficient on the first son dummy is insignificant, the positive and significant coefficient on the real assets share implies that the heir of the family line tends to inherit a larger share than other siblings, indicating again that dynastic motives appear to play a role.

Next, turning to the variables examining whether parents treat their children equally, the estimated coefficients clearly indicate that respondents who are better educated and/or who received financial support from their parents tend to receive smaller bequests in primary inheritances. This is probably because parents consider investment in their children's human capital and inter-vivos financial support as substitutes for bequests and try to equalize the total
amount of these intergenerational transfers across siblings. $ ^{20} $

Looking at the variables examining altruism toward family members, we find that (parental) altruism in the form of assisting relatively worse-off children (represented by a negative coefficient on the dummy for economically advantaged children) does not seem to play a significant role. On the other hand, we find that respondents' share is larger when the surviving parent was self-employed or an employee (relative to the case where the surviving parent was a full-time homemaker). A possible interpretation is that surviving parents who were self-employed or an employee are likely to be better off than surviving parents who were a full-time homemaker, and that, in the negotiations surrounding a primary inheritance, better-off surviving parents handed a larger share of a bequest to their children or that, conversely, in the case of less well-off parent, children handed a larger share to their parent. When we include dummies for the age group of the surviving parent, as shown in columns B, D, F, and H of Table 4, we find that the coefficients are positive and significant, implying that respondents with a younger surviving parent tend to receive less, presumably because the surviving parent is expected to have longer to live and therefore have greater financial needs than an older surviving parent. These findings are consistent with the altruism motive, indicating that children consider the economic needs of their surviving parent when dividing bequests among heirs.

Turning to strategic motives, we expect the coefficients both on the decedent co-residence dummy and on the surviving spouse co-residence dummy to be positive if parental strategic motives play a role in dividing bequests in primary inheritances. We find that although respondents that had lived with a decedent did not receive a significantly larger bequest share, those that lived with a surviving parent did, probably reflecting the guiding influence of surviving parents in primary inheritances. Meanwhile, whether respondents had provided financial assistance to their parents did not have a significant effect on the bequest share they received, regardless of which specification are employed. $ ^{21} $

Finally, looking at the coefficients on the other miscellaneous dummies – i.e., the dummy representing how good respondents' relationship with their parents was and the dummy representing whether respondents had an incentive to avoid inheritance tax payments – are positive as expected but statistically insignificant. The fact that the result for the inheritance tax dummy is insignificant is not surprising, given that only around 4 percent of inheritance events
are subject to inheritance tax.

### 5.2 Determinants of bequest division in secondary inheritances

Having found that the patterns of bequest division in primary inheritances are consistent with a variety of bequest motives suggested in the literature, we now turn to the analysis of secondary inheritances. Since negotiations in secondary inheritances do not include a surviving spouse, the only way that parents can ensure that their wishes are heeded is to prepare a will. However, since in Japan less than 10 percent of decedents leave a will, patterns of bequest division in secondary inheritances largely reflect traditional family values in Japan shaping negotiations among heirs (children). Based on this reasoning, we expect the comparison of primary and secondary inheritances to provide useful insights into parental bequest motives.

Table 5 reports the estimation results of the Tobit and OLS models for secondary inheritances. As explained in Section 4.2, we exclude terms that are irrelevant for secondary inheritances. Broadly speaking, the estimated coefficients in Table 5 follow a similar pattern to that observed in the regressions for primary inheritances reported in Table 4. Specifically, starting with the variables intended to capture the dynastic motive, we obtain positive and significant marginal effects both for the gender quasi-dummy and for the ratio of real assets. This finding implies that in secondary inheritances, in which parental motives may be reflected less clearly, bequests still appear to be divided in line with the dynastic (family-line) motive. That being said, the magnitude of the estimated marginal effects is smaller in the regressions for secondary inheritances. This implies that decedents (parents) are more concerned about the continuation of the family line than their heirs (children), but heirs (to some extent) also allow the unequal division of bequests in order to compensate those responsible for maintaining the family line for the associated costs (such as holding memorial services, maintaining the family grave, etc).

Turning to the variables examining the equal treatment of children, we find that the negative coefficient on the dummy for better educated respondents (or their spouses) becomes smaller and statistically insignificant, while that on the dummy for those who received financial assistance from their parents becomes close to zero. This result suggests that while parents in primary inheritances try to balance out total transfers across their children to show that they treat their children equally, in the negotiations regarding secondary inheritances children do not dare to seek redress for special benefits (such as inter vivos gifts and educational costs). This finding may be understood as evidence that children respect parents' decision to treat children differently during their lifetime in terms of gifts and education expenses.

The marginal effect on the dummy for economically advantaged respondents (or their spouses) is insignificant, suggesting that altruism toward economically disadvantaged family members does not play a role in the allocation of secondary inheritances. The coefficient on the
is present is statistically significant. $ ^{22} $ The smaller share of wills in primary inheritances likely results from the fact that in primary inheritances wills are not necessary to make heirs comply with parents’ intentions, since the surviving spouse will be present during the family negotiations to ensure the wishes of the deceased are taken into account.

Next, to examine how the presence of a will affects the division of bequests, Table 8 compares the percentage of heirs who report that their share was different from the statutory share in cases where a will was present and in cases where no will was present. We expect that if the purpose of leaving a will is to divide bequests unequally to achieve a particular outcome based on the parental motives discussed above, the percentage of respondents reporting a deviation should be higher when a will was left than when no will was left. While the percentages reported are higher in cases where a will was left, the difference between cases with and without a will as expected does not appear to be very large. Therefore, the results suggest that wills are used only marginally to deviate from the statutory shares. $ ^{23} $

The findings above indicate that, in Japan, bequests are often divided unequally among children even without the presence of a will or a parent. The unequal division of bequests in Japan therefore appears to reflect certain values shared by families and their members – which, in turn, are shaped by traditional family values – that make such unequal treatment acceptable or even desirable. This interpretation is further supported by responses to our “Family and Lifestyle Survey” questionnaire. The survey first asked respondents whether they thought bequests should be divided in accordance with the statutory division. The results show that 77 percent (=1,427/2,297) of respondents thought that it was not necessary to adhere to the statutory share. $ ^{24} $

Respondents who replied that it was not necessary to adhere to the statutory division were further asked to answer another question about the merits of a non-statutory unequal division. The distribution of answers is shown in Table 9. Almost half of the respondents indicated that they thought this allowed giving due consideration to children that had lived with and/or taken care of their parent(s). The second most common response was that it allowed them to distribute the bequest so that the surviving parent was well taken care of. These responses indicate that children (heirs) in Japan first consider the life of their parent before demanding their own share.
of an inheritance. A little less than a quarter of respondents answered that it would allow them to distribute the bequest to maintain the family line (and/or family businesses). This means that children (heirs) in contemporary Japan are still often concerned about the family line even without the presence of a parent. In addition, Japanese heirs appear to be concerned about the well-being of economically disadvantaged siblings as well as dividing bequests to minimize the tax burden, and they often choose non-statutory (unequal) shares even in secondary inheritances where no parent or will are present.

### 6. Conclusion

Using a unique survey-based micro dataset, we investigated the intra-family division of bequests in Japan to examine the importance of institutional and cultural differences in understanding patterns of bequest division and to understand parental motivations behind intergenerational asset transfers.

We first argue that certain circumstances making (observable) bequests equal (among children) in the United States are not present in Japan. As a result, in contrast with the United States, where most bequests are divided equally, a substantial share of bequests in Japan are divided unequally. We then utilize the observed patterns of unequal bequest division in Japan to identify parental bequest motives. Among other things, comparing primary and secondary inheritances allowed us to examine the role of parental motives and traditional family values in Japan.

We found that parental motives show up more clearly in primary inheritances, where the surviving spouse is likely to be involved in the negotiations regarding how the bequest should be divided among family members. The analysis suggests that the division of bequests in Japan reflects parents' desire to maintain the family line and to treat children equally in terms of the total lifetime transfers they receive. Parents also appear to bequeath more to children living with the surviving parent, which is in line with models of parental strategic behavior. However, contrary to the prediction of standard altruism models, parents do not bequeath more to economically disadvantaged children, although children appear to altruistically allocate bequests to a (disadvantaged) surviving parent.

We further find that even in secondary inheritances, where no parent is present, it is not uncommon to observe unequal bequests in Japan. Our analysis indicates that wills do not play an important role in explaining such unequal bequests. Instead, unequal division reflects heirs' own preference to give a larger share to the heir to the family line and/or those who took care of their parents in old age. This suggests that we cannot ignore the role of cultural differences when comparing patterns of bequest division among countries with different social and cultural norms.

Finally, turning to the implications of our findings, it is well known that parental altruism
plays a key role in the Ricardian equivalence hypothesis. Our finding that parental motives other than the altruistic motive play a role therefore probably implies that Ricardian equivalence does not hold in Japan and that tax cuts financed by the issuance of government bonds are likely to have some effect. Regarding the intergenerational transmission of wealth inequalities, our finding that altruism does not seem to play a large role potentially implies that, as suggested by Horioka (2014), in Japan wealth inequalities are less likely to be passed on from generation to generation. On the other hand, dynastic (family line) motive-based inheritances potentially intensify the intergenerational transmission of inequalities.

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Figure 1. Bequest shares by number of siblings and their deviation from the statutory shares

### 1.1 Primary inheritances

(b) Mean of absolute deviations and fraction of surviving spouses for whom share deviated from statutory share

(c) Respondents' share

(d) Mean of absolute deviations and fraction of respondents for whom share deviated from statutory share

### 1.2 Secondary inheritances

(a) Respondents' share

(b) Mean of absolute deviations and fraction of respondents for whom share deviated from statutory share