Do Intergenerational Transfers Reduce Household Income Inequality among Older People in Peninsular Malaysia?

Julie DaVanzo, RAND
Shahina Amin, University of Northern Iowa

Multigenerational living and intergenerational transfers of resources are common in developing countries. For example, in Peninsular Malaysia in 1988, more than two-thirds of persons aged 60 or older lived with an adult child (aged 20 or older) (DaVanzo and Chan, Demography, 1994), and the majority of people who had adult children received transfers of money from those children (and some received goods and services also) (Lillard and Willis, Demography, 1997). However, little is known about how the earnings of coresident kin and transfers from non-coresident kin affect the incomes of households that contain one or more older persons. This paper will examine the household incomes of "seniors" (persons aged 50 or older) in Peninsular Malaysia, with particular attention to the contributions of the incomes of coresident kin and of net transfers received from non-coresident family members. We will use data from the Senior sample of the Second Malaysian Family Life Survey, a representative sample of persons aged 50 or older in Peninsular Malaysia in 1988. We will document the relative size of each of these sources of income for households that contain one or more seniors and the extent of income inequality among such households and will assess whether inequality would have been greater in the absence of the earnings of coresident relatives and of transfers received from non-coresident family members, each considered separately. We will do this by comparing the counterfactual value for a measure of inequality (we will consider both the coefficient of variation and the Gini index) when the values of these sources of income are set to zero to the value of this measure of income inequality when actual total household income is considered. We will also consider per capita and per adult measures of income to adjust for household size. In addition, we will look at the non-market activities in which seniors engage (e.g., child care, gardening) to get a sense of the roles that older people play in extended-family living. We will examine differences between households of currently married seniors to those where the senior is widowed or divorced. We will also examine ethnic differences, because the living arrangements of seniors, the extent of intergenerational transfers, and the levels of income and income inequality all vary considerably among the three main ethnic groups in Peninsular Malaysia – Malays, Chinese, and Indians. This work builds on previous work by the authors that has considered (1) the roles of wives’ earnings in explaining the inequality of household earnings in Malaysia, both at the point in time and over time (Amin and DaVanzo, under journal review); (2) life-cycle labor supply of married women and its effects on family income inequality in Malaysia (Amin, Journal of the Asia and Pacific Economy, 2003); (3) the roles of the earnings of adults other than the head and wife in explaining the inequality of household earnings in Malaysia, both at the point in time and over time, for a sample of households with an ever-married woman under age 50 (Amin and DaVanzo, PAA 2002); (4) the living arrangements of older Malaysians (DaVanzo and Chan, Demography, 1994); (5) income inequality in Malaysia (Kusnic and DaVanzo, RAND report and four journal articles, early 1980s); and (6) time allocation in Malaysia (DaVanzo and Lee, book chapter, 1982).