Various Motives of Bequest in Indonesia

Turro Wongkaren, University of Hawaii at Manoa

Motive for bequest has been an important issue in the study of inter-generational transfer within households. Two motives usually mentioned in the literature are altruistic and exchange motives. However, most studies use single homogenous goods, which may not be close to reality. The paper tries to deal with different kind of goods. The paper also deals with the differences in cultural settings and demographic situations. Do parents from different cultural settings have different motives in leaving bequest? Would the change in household member size change their motive? Literature in economics and sociology shows that motive of bequests might differ from one society to another (for instance, Lee 2000). But not many researches have examined the difference in motives among ethnic groups in one country, and especially no such analysis has been done for Indonesia. Theoretical Focus Two standard competing hypotheses, altruistic and exchange models, are usually used to test the motive. Typically it is examined if parents’ lifetime earning has a positive or negative relationship with children’s life time earning. The results vary from accepting altruistic motive (such as Tomes (1981) and Tsung (1995)) to rejecting (Altonji et al 1992, 1997). One drawback found in most of the studies done so far is in the treatment of bequest, which is usually assumed to be single-homogenous goods. In reality, different parents might leave different kind of goods to their children. Recognizing the difference, this paper argues that there might be another aspect underlying motive of bequest. Parents bequeath their children according to their own characteristics, and these differences in parent’s characteristics may underline different motive of bequest. Rural area parent who is a farmer, for instance, is more likely to leave land to his/her children. Since land is a very important part of his/her own living, it is less likely for the parent to bargain for any kind of exchange with the children. Meanwhile, urban area parent who has jewelry has more power to bargain with the children regarding their bequest (or its size). This kind of variety does not appear in the result using single homogenous goods. Data and Research Method The 1993 and 1997 Indonesian Family Life Survey (IFLS) provide data set to analyze the issue. It has sample of about 7,200 households from thirteen provinces in Indonesia, and covers around 83 percent of the population. Of these, about 17 percent of household heads received bequest from their parents. The bequest comes in different forms, such as land, house, livestock, and jewelry. The data set also contains information about ethnic groups, which allow us to look at the cultural differences. To see the characteristics of the parents who leave bequest, a Heckman procedure is performed. The procedure is done for each kind of bequest and for different big ethnic group in Indonesia. Findings Preliminary finding shows that different characteristics of parents do result in different motive of bequests. Also, different ethnic groups seem to have different motives in leaving bequest to their children.