The issue of old-age security in the developed world has to do with Social
Security and Medicare. However, in the developing world, old-age security
still relies on the support from children both instrumentally and financially.
The association of the number of children that the elderly have and the
amount of support they receive from their children is a rather complicated
phenomenon, especially when children do not reside with their parents and
when there is a rise of institutional help for the elderly that one can
acquire materially. So, will children still provide old-age security in
the developing world?
In order to answer this question, the paper looks at specific examples from
Bangladesh, China and Malaysia. The first section looks at the impact of
children on the survival of the elderly in rural Bangladesh. The second
explores the motives for intergenerational transfers within families in
Malaysia. The third section examines whether reductions in family size undermine
traditional support mechanisms for older adults, and finally, the last section
draws on the results of all three countries to show that in the developing
world old-age security is still predominantly dependent on children and
presents the conclusions.
Children & the Survival of the Elderly in Rural Bangladesh
Owing to the inadequate institutional sources of support, like pensions,
insurance and credit markets, through neither the government nor the private
sector in Bangladesh, there is a tacit assumption that the elderly will
be taken care of by their primary kin, especially by their children. Cross-sectional
studies show that elderly women without sons may be particularly vulnerable.
The impact of sons on the mortality of the elderly appears to be independent
of the proximity and marital status (Rahman, 1999). Studies show that sons
have a substantial impact on reducing the mortality for both elderly men
and women. Both the married and the non-married elderly benefit equally
in terms of improved survival from having sons. Furthermore, the beneficial
impact of sons on the survival of the elderly becomes significant once they
have at least two surviving sons; there appears to be little additional
benefit from having more than two (Rahman, 1999). Having two sons may reflect
the advantage of a diversification of risk strategy, like hedging of bets.
Two also increase the options for the elderly and may improve their bargaining
power. Having more than two may result in quantity-quality trade-offs, since
the elderly with larger numbers of sons may on average have "poorer"
sons. In addition, the beneficial impact of sons on parental survival is
not dependant on proximity; it is actually quite the opposite. The elderly
with their sons living further may benefit from increased remittances, as
income generating opportunities in distant urban areas may be higher than
in rural areas. Sometimes, even if the sons live away, their families (spouses
and children) live in the villages. In this case, the elderly benefit from
increased remittances from sons' higher incomes and instrumental support
from daughters in law and grandchildren who live with or near them (Rahman,
1999).
In comparison to the benefits the elderly receive from their sons, daughters
have no significant impact on the mortality of their elderly parents (Rahman,
1999). This is consistent with the assumption that daughters in rural Bangladesh
are considered to be part of the husband's family. They marry early and
go away, and suffer from the lack of earning power, all of which make it
harder for distant daughters to contribute to their parents' welfare.
The differing effects of sons and daughters on the mortality of the elderly
suggest that in the absence of family support, a concern for security in
old age will continue to lead to a strong son preference. Moreover, the
finding that at least two sons are required for a measurable impact on the
survival of the elderly does not bode well for a continuation of the rapid
fertility decline that Bangladesh has experienced in recent years.
Intergenerational Transfers in Malaysia
Like Bangladesh, children are an important source of old-age security in
Malaysia, which is, in part, children's repayment for parental investments
in their education. This repayment is a function of the children's income
and in the case of females, a function of their spouses' incomes. Thus,
there are "inter vivos" transfers of money and time between parents
and children in Malaysia (Lillard & Willis, 1997).
According to the Old Age Security hypothesis, the dominant direction of
monetary transfers within families is from the younger to the older generation
(Willis, 1980). Children provide income for their elderly parents because,
on the one hand, asset accumulation through savings is difficult and risky
and on the other hand, the availability of pensions and state-provided social
security tend to be extremely limited or non-existent. In the case of Malaysia,
the results of Lillard & Willis (1997) show that the determinants of
the transfer behavior are weakly consistent with the hypothesis, with the
strongest evidence showing that old age support is provided by sons for
mothers who are aged, widowed or in poor health.
On the other hand, there is strong evidence of the Parental Repayment Hypothesis
in Malaysia. It says that human capital investment in children is financed
through an implicit family capital market in which parents provide support
for their children's education with a combination of grants and loans, and
children repay them by providing old age support for their parents. However,
in contrast to the Becker-Tomes (1976) theory, in a rapidly growing country
like Malaysia, lifetime incomes of the older generation are generally lower
than of the younger generation and the demand for educated labor tends to
grow rapidly. Under these circumstances, parents have an incentive to shift
some of their retirement savings toward investment in their children's human
capital, provided they can expect to be repaid when they reach old age.
Another hypothesis that explains transfers within families is that transfers
are simply gifts; given because of altruistic feelings by one family member
for another. Current transfers in Malaysia constitute a relatively small
percentage of the total income of the older generation, and it seems likely
that there is a considerable "grant" component in parental investment
in children (Lillard & Willis, 1997). In addition, children's transfers
to parents tend to be income-contingent and that the amount received by
the elderly parents is contingent on their marital status, age and health.
These are features of pooling relationships that would be mutually beneficial
among risk-averse individuals and would be generated if these individuals
are altruistic toward one another.
There is also strong evidence of exchange-related transfer behavior in Malaysian
households. Cox (1987) argues that if parental transfers to children represent
implicit payment for services children provide to parents and these services
are demanded inelastically, parents would tend to transfer more to their
relatively high income children, as opposed to altruistic parents who will
transfer less. There is clear evidence of exchange of money for help with
both housework provided by children to their parents and childcare and housework
provided by the parents for their children.
Finally, there are strongly positive and significant correlations between
components determining the existence of a transfer relationship (Lillard
& Willis, 1997). The results suggest a great deal of heterogeneity in
the strength of transfer networks, with some families showing well-established
transfer relationships along all dimensions and other families showing few
connections in any dimension. But, the bottom line is that Malaysian children
still provide old-age security to their parents in a system of exchange
of money for help system, where parents invest in the children's human capital
and children grow up and help their parents in their old age.
Reductions in Family Size and Support for Older Adults in China
Change in China's age structure poses concerns regarding future generations,
who may have to expect less support as the availability of children declines.
One hypothesis is that other things being equal, those with a greater number
of children will be more likely to receive support from children and less
likely to receive support from other sources.
One study affirms the importance of children's support to the elderly in
China (Zimmer and Kwong, 2003). Having more than one child increases the
probability of receiving instrumental support from children in both rural
and urban China. Those with three or more children are less likely to receive
support from other sources, while those without any children are most likely
to receive support from other sources (Zimmer and Kwong, 2003). This suggests
that the role of other sources is fundamentally to assist those who are
childless. Like the receipt of instrumental support, the number of children
has a strong influence on the probability of receiving financial support
from children in both rural and urban areas, while additional children increases
the likelihood of receiving financial support without much diminishing return
like that in Malaysia.
Besides focusing on the number of children, it is seen that those with a
high need are also more likely to receive support from both children and
other sources. Poor health and the lack of a spouse increase the likelihood
of instrumental support, while low income and no spouse or a low-income
spouse increases the chances of financial support, particularly from children.
Not being eligible for a pension also greatly increases the probability
of support from all sources. Thus, in China, need seems to be a good predictor
of obtaining support.
With respect to availability, co-residence with offspring substantially
increases the probability of receiving instrumental support from children
and decreases the probability of receiving support from other sources. Also,
older as opposed to younger elders are more likely to receive instrumental
and financial support from both children and other sources, but women receive
more support than do older men (Zimmer and Kwong, 2003).
Discussion of Results and Conclusion
The results from studies by Zimmer and Kwong (2003) show that overall reductions
in support will be somewhat moderate in the next generation. A decline in
China's fertility alone will not lead to a collapse of the traditional support
system. The reason for this is that the probability of obtaining support
for those with one or two children is not substantially different from the
probability of those with more than two children, as far as instrumental
assistance is concerned; it is the childless that are at a disadvantage.
Hence, the maintenance of the desire to have at least one child is important
for the support of older adults in China in the future.
On the other hand, in Malaysia, the dominant direction of monetary transfers
between non-resident parents and children is from the younger to the older
generation. Thus, family finance of investment in the younger generation's
human capital plays a significant role in facilitating rapid economic growth.
Monetary transfers from the children have enabled both the younger and the
older generation to share in the benefits of growth in Malaysia.
However, in rural Bangladesh, children, especially sons, play a significant
and complex role in determining the survival of the elderly. In the absence
of institutional support, the need for more sons can be a hindrance to the
future reduction of fertility.
Finally, the three countries give us a picture of how children in the developing
world are a primary source of old-age support. It is hard to say how the
support system will change as these countries develop and non-family support
services become available. As of now, children still provide old-age security
in the developing world.
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