Intergenerational transfers and household saving in China : new survey evidence on the extent and motivation of intergenerational transfers in urban and rural China
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- Master Thesis 
This thesis offers new insights explaining the lack of dissaving among elderly in China. We provide new survey data from China with detailed information on the economic situation of elderly, and in particular on the interaction between elderly parents and adult children. We present data on the extent of inter-vivos transfers and intended bequests, and we test whether these transfers represent strategic interaction with adult children, reflecting life-cycle and precautionary motives for wealth accumulation, or altruistic motives. We find that elderly Chinese on average intend to pass along more than six times their yearly net income in bequests and large inter-vivos transfers to their children. We also reveal that these transfers serve as strong motives in the saving behaviour of the old generation in China. Furthermore, we find that the extensive amount of transfers fits better to an exchange model of intergenerational transfers than to an altruistic model. Recipient’s earnings affect downward transfer amounts positively, and both the probability of receiving bequests and downward transfer amounts correlates positively with strategic child interaction. We find a positive relationship for elderly-care provision by adult children, and, for a subset of the population, evidence of intra-family annuity markets where children provide elderly parents with regular financial support in exchange for increased bequests. We find only weak indications of intergenerational transfers motivated by altruism, and this effect is concentrated among those with the highest income levels. The findings have powerful implications both theoretically and for policy making. First, they contribute with supportive evidence to the debate over the capability of life-cycle motives to explain wealth accumulation among elderly in China. The findings also suggest that large amounts of bequests and intergenerational transfer not necessarily are contradictory to such saving motives. Indeed, the findings indicate that downward intergenerational transfers have an important role in securing elderly-life care and income security for elderly in China. This has implications for new governmental social security and health care programs that need to carefully take into account the effect such programs will have on intergenerational transfers.