Max Planck Institute for Demographic Research
Spreadsheet estimation of bequests Miguel Sánchez-Romero†† †
Max Planck Institute for Demographic Research (MPIDR)
†
Project financed by University of California, Berkeley
Outline
Outline Overview Issues Method Data How to use the Spreadsheet Extensions
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June 6h 2013
Global NTA Conference, Barcelona
2 / 20
Overview
Overview
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Using data of 17 countries, Mason et al. (2011) found that asset income of working-age adults is much greater than can be attributed to their observed saving. They rely on bequests and asset transfers.
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June 6h 2013
Global NTA Conference, Barcelona
3 / 20
Issues
Issues
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Lack of available datasets to estimate assets transferred at death
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The law of inheritance differs by country
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June 6h 2013
Global NTA Conference, Barcelona
4 / 20
Method
Representative household reconstruction
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June 6h 2013
Global NTA Conference, Barcelona
5 / 20
Method
Data - UN demographic data 1950-2010 (fertility, mortality, and population) Assumptions - Individuals are paired at age 12 with people of the same cohort - Exit from marriage only occurs because of death - Children have two representative parents - Bequest is given either to children, or spouse, or both.
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June 6h 2013
Global NTA Conference, Barcelona
6 / 20
Method
Method caveats Sources of estimation biases - Limited demographic information (don’t use this method before 1990 with UN data!) - High correlation between inter-vivos transfers and mortality - High proportion of bequests given to individuals other than children and spouses - Significant age disparity between spouses - Annuitized wealth - Polygamy - Heterogeneous households and inequality(?)
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June 6h 2013
Global NTA Conference, Barcelona
7 / 20
Method
Bequest: Part I/II ...
Bequest given at age x depends on
pt(x)pt(x) 2pt(x)qt(x) pt(x)
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Age
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Partnership status {married, widow/er}
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Number of eligible offspring
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Assets holding
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Inheritance law
qt(x)qt(x) qt(x)
Figure: Expected bequest given, by partnership status and age ()
June 6h 2013
Global NTA Conference, Barcelona
8 / 20
Method
Bequest: Part II/II ...
ft (x + α)
Bequest received at age x depends on I
Age of the expected parent
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Status of the parent {married, widow/er}
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Assets held by parent(s)
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Own marriage status
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Assets held by spouse
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Inheritance law
ft (x + α + 1)
ft (x + α + 2)
ft (x + β)
Figure: Expected bequest received from parent(s), by age ()
June 6h 2013
Global NTA Conference, Barcelona
9 / 20
Data
Data I/II 0.10
First parent Both parents Second parent Spouse Total (sum) JSTAR raw data JSTAR smoothed
Cases = 216 Exposures = 3946
Hazard rate
0.08
0.06
0.04
0.02
0 20
40
60
Age
80
100
120
Figure: Inheritance hazard rate, year 2009 ()
June 6h 2013
Global NTA Conference, Barcelona
10 / 20
Data
Data II/II
Relative to labor income ages 30−50
0.3
Bequest motive I Bequest motive II Bequest motive III JSTAR raw data JSTAR smoothed
Cases = 216 Exposures = 3946 0.2
0.1
0 20
40
60
Age
80
100
120
Figure: Average bequest received, year 2009 ()
June 6h 2013
Global NTA Conference, Barcelona
11 / 20
How to use the Spreadsheet
How to start using the Bequests template v2: I/II
Starting ? Go to the NTA wiki and download the Bequest package in http://www.ntaccounts.org/web/nta/show/Bequests%20and%20other%20capital%20transfers
? Follow the steps contained in Bequest template v2, worksheet READ ME
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June 6h 2013
Global NTA Conference, Barcelona
12 / 20
How to use the Spreadsheet
How to start using the Bequests template v2: I/II Key variables ? Choose the proportion of inheritance given to children (according to country’s inheritance law, or survey data) ? Choose the appropriate interest rate (r ) Asset holdingsx =
Priv. asset incomex r
- Rule of thumb (closed-economy) r? ≈
α Total labor income − 0.05 1 − α Total asset holdings
where 1 − α is equal to Compensation of Employees to Value Added ratio. - Assume a constant capital-to-labor income ratio ()
June 6h 2013
Global NTA Conference, Barcelona
13 / 20
How to use the Spreadsheet
Interface
Figure: Bequests template (Summary worksheet) ()
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Global NTA Conference, Barcelona
14 / 20
How to use the Spreadsheet
Bequest profile
Figure: Proportion of inheritance given to children, α = 0% ()
June 6h 2013
Global NTA Conference, Barcelona
15 / 20
How to use the Spreadsheet
Bequest profile
Figure: Proportion of inheritance given to children, α = 50% ()
June 6h 2013
Global NTA Conference, Barcelona
16 / 20
How to use the Spreadsheet
Bequest profile
Figure: Proportion of inheritance given to children, α = 100% ()
June 6h 2013
Global NTA Conference, Barcelona
17 / 20
How to use the Spreadsheet
How to save the results Macro “Save bequest profiles” ? Clicking on the macro, all the information is saved in SavedProfiles v2.xlsx Legend - BIP1 per capita bequest inflow from the death of the first parent - BIP12 per capita bequest inflow from the simultaneous death of both parents - BIP2 per capita bequest inflow from the death of the second parent - BIPS per capita bequest inflow from the death of the spouse - BI total per capita bequest inflow - BO per capita bequest outflow - BWx per capita bequest wealth ()
June 6h 2013
Global NTA Conference, Barcelona
18 / 20
Extensions
Extensions How to introduce your own demographic information Step 1. Paste ASFR in worksheet fx Step 2. Paste ASMR, qx, Lx, px, and the population distribution in worksheet Data Step 3. Paste asset income, asset holdings, and labor income data in worksheet “at (x)” Please, maintain the format and the age range as in the original version Step 4. Go to worksheet Summary and change the Database information (Cells D7:E9) Step 5. Run Macros “Generate population” and “Generate bequest profile” ()
June 6h 2013
Global NTA Conference, Barcelona
19 / 20
Extensions
Thank you for your attention
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June 6h 2013
Global NTA Conference, Barcelona
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