Changing Inheritance Behaviors Due to Low Fertility and Population Aging and Policy Recommendations

Abstract

Since 2001, South Korea has been experiencing lowest low fertilities defined by failure to reach the total fertility rate (TFR) of 1.3 and unfortunately, there is no sign that TFR will go up to the level of 1.3, let alone the replacement TFR of 2.1, in forseeable future. In addition, the pace of population aging is gathering so breathtaking a force that it is nearly impossible to find a match in the world. In this report, we endeavor to unearth a fraction of changing inheritance behaviors under these enormous demographic currents. To contribute to the literature on the relationship between demographic shift and inheritance, we attempt to distinguish two levels of influences stemming from low fertility and population aging: social level and individual level. We capture the social and individual levels of low fertility using TFR and number of children respectively. Life expectancy and age serve as indicators for the social and individual level of population aging respectively. Drawing social theories from numerous fields of social sciences, we formulate persuasive hypotheses predicting impacts of low fertility and population aging on inheritance behaviors, with the two-level structures carefully considered. We restrict our attention on timings and beneficiaries of inheritance, in large part because of data availability. To examine our hypotheses, we utilize cross-sectional data on social life and health behaviors of older persons with observation points in 1994, 1998, 2004, 2008 and 2011 in addition to our own survey conducted for this report in 2012. Data are fitted to multinomial logit model and ordinal logit model depending on the nature of the response variable. Our main findings include that multiple children, especially number of sons, tend to speed up the process of inheritance and that period TFR appears to enhance likelihood of the eldest son being the beneficiary of inheritance. In addition, response on a counterfactual question on inheritance behaviors reveals that bad health seems to foment intention to bequeath wealth to a child who helps the benefactor. We are restrained from asserting that our findings reflect causal flow from the explanatory variables to the response variables particularly because we use a cross-sectional dataset. For instance, the reverse causality is plausible that children would live together with their parents because they received some part of inheritance. After commenting on limitations of this report, we delineate our future research agenda.