Bequest Motives, Inheritance Tax, and Housing Choice: A Problem of Inefficient Empty Nests

52 Pages Posted: 17 Dec 2019

See all articles by Miki Seko

Miki Seko

Keio University - Faculty of Economics

Kazuto Sumita

affiliation not provided to SSRN

Jiro Yoshida

Pennsylvania State University - Smeal College of Business; The University of Tokyo - Graduate School of Economics

Date Written: March 28, 2019

Abstract

The housing stock is underutilized in empty nests, which can be caused by the low mobility of elderly households and early renovations for their heirs. This study sheds light on the cause of inefficient empty nests by focusing on a bequest motive and inheritance tax. Japanese household panel data show that empty nests are more pronounced for elderly, non-moving, and renovating households. The motive to bequeath housing makes moving less likely but capacity-increasing renovations more likely. The motive to bequeath housing is influenced by the inheritance-tax benefit of housing in addition to income, wealth, and better housing structures. Thus, the inheritance-tax benefit of housing exacerbates a long-term empty nest problem by distorting housing choices.

Keywords: underutilized housing stock, tax distortions, mobility, renovation, aging society, IV probit model, Japan

JEL Classification: J14, H21, R21

Suggested Citation

Seko, Miki and Sumita, Kazuto and Yoshida, Jiro, Bequest Motives, Inheritance Tax, and Housing Choice: A Problem of Inefficient Empty Nests (March 28, 2019). Available at SSRN: https://ssrn.com/abstract=3496105 or http://dx.doi.org/10.2139/ssrn.3496105

Miki Seko

Keio University - Faculty of Economics ( email )

2-15-45 Mita, Ninato-ku
Tokyo 1088345
Japan

Kazuto Sumita

affiliation not provided to SSRN

Jiro Yoshida (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

368 Business Building
Smeal College of Business
University Park, PA 16802
United States
814-865-0392 (Phone)
814-865-6284 (Fax)

HOME PAGE: http://www.personal.psu.edu/juy18

The University of Tokyo - Graduate School of Economics ( email )

7-3-1 Hongo
Bunkyo-ku, Tokyo 113-0033
Japan
813-5841-5653 (Phone)
813-5841-5521 (Fax)

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