Inheritance, dependence and poverty

A few weeks ago, I attended a conference [i] which gathered social scientists (sociologists, historians, economists, legal experts) working on a similar topic using different approaches. This year’s topic was “Inheritance and Bequest”[ii]. I had the opportunity to listen to Emilia Schijman, a young sociologist, and I found her talk fascinating.

Her talk was about bequests in a context of poverty in Argentina. At first sight, it seems that bequests and poverty do not get along very well: poor people do not own anything, so what can they leave as bequest? But this is a matter of scale. People living in social housing in Buenos Aires do own something: an occupancy title. Although the occupancy title is supposed to belong to one person, a sub-market has emerged and the owner of the title can yield it, sell it out, lease-out the apartment and even leave it as bequest.

Holding an occupancy title can become an important asset. As they get older, people require care and help in their daily life. In Argentina, the social security system does not provide enough help to dependent people. The social norms impose that the family take care of the elderly. But sometimes families do not take care of them and poor dependent people cannot afford the price of private care. Schijman’s study shows that when the State and the family are not providing care to the elderly, people adopt informal strategies: they propose accommodation and leaving the occupancy title as bequest in exchange for care. The caretaker can obviously be a member of the family or a neighbor, but it can also be a complete stranger. Indeed, this type of arrangement is often organized by the social center of the neighborhood. As a consequence, owning a proper occupancy title is an insurance against dependence for the elderly. However, as those arrangements are not legal, they are highly risky. The caretaker relies on an informal agreement with the children, who are the legal heirs of the occupancy title.

This talk raises new questions for economists. First, it shows that poverty does not mean absence of bequest but it turns it into something different from transmission of traditional assets. The bequests motive of the poor could be similar to the bequest motives studied in the economic literature. The example proposed by the author of the study is similar to the bequest motive studied by Bernheim, Shleifer and Summers (1985). In their simple model, “the testator influences the decisions of the beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries’ actions.” So the promise of the occupancy title as bequest has to be credible to make the agreement possible, especially when the caretaker is a complete stranger to the family. Maybe the reward (the occupancy title) is high enough to make people accept to take care of a dependent person even if it is risky? But what could happen if the State decide to be more restrictive on who can inherit from the occupancy title?

Second, the cost of dependence is an issue in many Western countries such as France or the US and many tools have been proposed to cope with the cost of dependence in a context of ageing population and limited growth, such as reverse mortgage. However, most of the tools rely on the wealth of the elderly, but what about those who do not own their house? Schijman’s study suggests that new types of arrangements could appear if the social security system and families do not provide care to the elderly. Those arrangements are worth studying as they might help understanding the issue of dependence in a context of poverty.

Bibliography:

Bernheim B.D., Shleifer A. and Summers L.H. (1985) “The Strategic Bequest Motive” Journal of Political Economics, vol. 93, No. 6

Schijman E. (2015), « Héritage contre prise en charge. Assurer ses vieux jours dans un contexte de pauvreté. » Communication pour la 3e journée des sciences sociales. « Léguer. Hériter. » Fondation pour les Sciences Sociales. Vendredi 11 décembre 2015. Bibliothèque Nationale de France.

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[i] The conference was organized by the Fondation des Sciences Sociales, under the auspices of the Fondation de France, on the 11th of December at the Bibliothèque Nationale de France.

[ii] The actual title in French was “Léguer, Hériter”.

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About Marion

I'm a researcher at INED (French Institute for Demographic Studies). I made a postdoc at the Université Catholique de Louvain. I have my PhD from the Paris School of Economics and the CREST in Paris. I'm interested in Family Economics, Poverty and Econometrics.
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