Altruistic Bequest Motives and Living Arrangements of Elderly Parents

Yiduo Zhang, Johns Hopkins University

Endogeneity is an important issue to be addressed in exploring the causal relations between bequest motives and living arrangement of the older parents. In this article I explore, in a game theory setting, the association between one particular type of bequest motives, the altruistic bequest motive (which is unconditional on adult children's behavior, contrasting to strategic bequest motives), and the co-residence status from elderly parents' perspective using RAND-cleaned 2000 HRS data. Instrumental variables and 2-stage regression are used as a strategy to adjust reverse causality. Our results show that, the higher the altruistic bequest motive the unmarried elderly parents have, the lower bargaining power they will have in forming intergenerational household consequently. This, as a result, will lead to a lower probability for older parents to co-residing with adult children adjusting for other socio-demographic factors.