To give or not to give: bequest estimate and wealth impact based on a CGE model with realistic demography in Japan

Abstract

In Japan due to the rapid population aging and its large financial pressure on pay-as-you-go retirement systems, the economic impact of bequest wealth has been drawing a tremendous amount of attention. Despite that, there are neither official statistics on bequest for the whole population, nor analyses of the historical evolution of bequest. Our study fills this gap by offering an estimate of bequest in Japan from 1850 to 2100, based on a computable general equilibrium model with realistic demography. Our model shows that the historical evolution of the bequest-to-output ratio in Japan follows the same U-shaped pattern described by Piketty (2011) for France. Moreover, we estimate that the annual flow of bequest represented between 4% and 6% of the output in the year 2000 and that it will reach between 7% and 13% of the output by year 2100.Deaton, A., 1997. The Analysis of Household Surveys: A Macroeconometric

Generational Economics and the National Transfer Accounts

“…Piketty (2011), for example, estimated the inheritance flow, which includes both bequest and inter vivos gifts, to have been about 15% of France’s national income in 2010, with a forecast of 20–25% in a few decades. Sánchez-Romero et al (2013) estimated Japan’s inheritance flow, using a Computed General Equilibrium (CGE) model, to have been about 8–12% of GDP in 2000 with a forecast of 14–26% in the year 2100.…”