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Intergenerational Transmission of Wealth and Life Satisfaction

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Abstract

Previous literature has demonstrated that family wealth (or parental wealth) has a significant effect on the life satisfaction of children, but the exact mechanism behind this effect remains unknown. This study thus investigates the extent to which parental wealth can have an effect on the child’s life satisfaction through parental life satisfaction and the child’s wealth, using data from the Korean Labor and Income Panel Study. This study tries to extend existing knowledge of the effect of family background on the child’s life satisfaction, by linking two related phenomena known as intergenerational transmission of life satisfaction and intergenerational transmission of wealth. This study shows that parents’ net wealth has an effect on the child’s life satisfaction through two important mediating factors, specifically, their own life satisfaction and the child’s net wealth. This empirical evidence sheds light on the mechanism that links parental wealth and the child’s life satisfaction.

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Notes

  1. Different terms have been used to indicate SWB, such as life satisfaction, happiness, welfare, utility, and quality of life; however, these terms have had different connotations according to the disciplines in which they have been used. In many studies in the social sciences, these terms have been used synonymously.

  2. To obtain an estimate of elasticity, the age-adjusted regression model is also frequently used by including the individuals’ age and age squared.

  3. The wealth variable used in the analysis is net wealth, which is the difference between the total value of assets and the value of liabilities owned. The categories of wealth used for the analyses will be explained in a later section of this paper.

  4. Please refer to the Statistics Korea web site: http://kostat.go.kr/portal/english/surveyOutlines/4/3/index.static

  5. For example, the average net wealth of the child can be calculated by exp(3.81).

  6. Every month, the OECD (Organisation for Economic Co-operation and Development) reports private final consumption PPP ratios for its member countries. As of May 2015, South Korea was at 84 relative to a United States price level of 100 (see http://www.oecd.org/std/purchasingpowerparitiespppsdata.htm).

  7. The changes in life satisfaction were traced based on adult children who moved out of their original homes. A large portion of the child–parent pairs reported in the survey that the children had moved out when the survey first began in 1998. For the Korean people, the late 1990s were marked by a financial crisis, the IMF crisis, which likely lowered life satisfaction of both parents and children in the first year in Fig.  2(a). Ten years after the IMF crisis, the global financial crisis occurred, causing the second downward trend in life satisfaction.

  8. The total indirect effects can be obtained by a1 *b1+ a2 *b2 in the Fig. 3.

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Authors and Affiliations

  1. College of Social Science, Chung-Ang University, Seoul, South Korea

    Kang-Rae Ma

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Correspondence to Kang-Rae Ma.

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The author, Kang-Rae Ma, declares that I have no conflict of interest.

Appendix

Appendix

Table 4 KLIPS samples
Full size table
Table 5 The two mediator model for the influence of parental net wealth on the child’s life satisfaction (basic model)
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Table 6 Indirect Effects of Parental Net Wealth on the Child’s Life Satisfaction (Basic Model)
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Table 7 The two mediator models with covariates
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Table 8 Indirect effects of parental net wealth on the child’s life satisfaction (model with covariates)
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Ma, KR. Intergenerational Transmission of Wealth and Life Satisfaction. Applied Research Quality Life 11, 1287–1308 (2016). https://doi.org/10.1007/s11482-015-9437-4

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