[en] This paper uses survey data from Germany, Spain, France, Italy, Great Britain and the United States to analyze how inheritances impact wealth inequality in a range of rich countries. Adopting an influence function regression approach, the paper calculates the counterfactual effects of small increases in the share of recipients of different-sized wealth transfers in each country. Results suggest that while a marginal increase in inheritance recipients generally contracts wealth inequality measures—confirming a common finding in the literature that inter-generational transfers tend to reduce relative wealth inequality—an increase in recipients of ‘large’ inheritances has the opposite effect. We determine what ‘large’ means in this context by point-estimating the thresholds above which transfers become disequalising. We find that transfers above the ninety-fifth percentile of the national transfer distribution are generally associated with an increasing effect on wealth inequality. Such thresholds are then put in perspective against the inheritance tax schedules in place in the six countries analyzed. No unique pattern emerges. While the thresholds are very close to tax exemption thresholds in Britain and Germany, they are somewhat higher in France and Spain and they are much lower in Italy and the United States.
Disciplines :
Economic systems & public economics Social economics Sociology & social sciences
Author, co-author :
Morelli, Salvatore; Roma Tre University, Department of Law, Rome, Italy
NOLAN, Brian ; University of Oxford, Department of Social Policy and Intervention and INET, Oxford, United Kingdom
Palomino, Juan C.; Universidad Complutense de Madrid, Department of Economic Analysis, EQUALITAS, and ICAE, Madrid, Spain
VAN KERM, Philippe ; University of Luxembourg > Faculty of Humanities, Education and Social Sciences (FHSE) > Department of Social Sciences (DSOC) > Socio-Economic Inequality
External co-authors :
yes
Language :
English
Title :
The influence of inheritances on wealth inequality in rich countries
Acciari, P., Alvaredo, F., Morelli, S., The concentration of personal wealth in Italy 1995–2016. J. Eur. Econ. Assoc, 2024, jvae002 Retrieved from https://doi.org/10.1093/jeea/jvae002.
Atkinson, A.B., Unequal Shares: Wealth in Britain, 1972, Allen Lane, London Retrieved from https://archive.org/details/unequalshareswea0000atki.
Atkinson, A.B., Inequality: what can be done?. Retrieved from https://www.hup.harvard.edu/catalog.php?isbn=9780674504769, 2015.
Atkinson, A.B., Wealth and inheritance in Britain from 1896 to the present. J. Econ. Inequal. 16 (2018), 137–169.
Batchelder, L.L., Leveling the Playing Field between Inherited Income and Income from Work Through an Inheritance Tax. Working Paper No. 20-11, 2020, NYU Law and Economics.
Batty, M., Bricker, J., Briggs, J., Friedman, S., Nemschoff, D., Nielsen, E., et al. The distributional financial accounts of the United States. Measuring Distribution and Mobility of Income and Wealth., 2022, University of Chicago Press Retrieved from https://doi.org/10.7208/chicago/9780226816043.003.0023.
Bavaro, M., Boscolo, S., Tedeschi, S., Simulating Long-run Wealth Distribution and Transmission: The Role of Intergenerational Transfers. Tech. Rep, 2024, INET Oxford WP Series.
Blanchet, T., Martínez-Toledano, C., Wealth inequality dynamics in europe and the United States: understanding the determinants. J. Monet. Econ. 133 (2023), 25–43.
Bönke, T., Werder, M.V., Westermeier, C., How inheritances shape wealth distributions: an international comparison. Econ. Lett. 159 (2017), 217–220 Retrieved from https://doi.org/10.1016/j.econlet.2017.08.007.
Boserup, S.H., Kopczuk, W., Kreiner, C.T., The role of bequests in shaping wealth inequality: evidence from Danish wealth records. Am. Econ. Rev. 106:5 (2016), 656–661 Retrieved from http://pubs.aeaweb.org/doi/10.1257/aer.p20161036.
Bricker, J., Henriques, A., Krimmel, J., Sabelhaus, J., Measuring income and wealth at the top using administrative and survey data. Brookings Pap. Econ. Act. 1 (2016), 261–331 Retrieved from https://doi.org/10.1353/eca.2016.0016.
Choe, C., Van Kerm, P., Foreign workers and the wage distribution: what does the influence function reveal?. Econometrics, 6(3), 2018 Retrieved from https://www.mdpi.com/2225-1146/6/3/41.
Cowell, F., Van de Gaer, D., He, C., Inheritance taxation: redistribution and predistribution. Bishop, J.A., Rodríguez, J.G., (eds.) Inequality, Taxation and Intergenerational Transmission, vol. 26, 2018, Emerald Publishing Limited, 1–13.
Crawford, R., Hood, A., Lifetime receipt of inheritances and the distribution of wealth in England. Fisc. Stud. 37:1 (2016), 55–75 Retrieved from https://doi.org/10.1111/j.1475-5890.2016.12087.
Davies, J.B., Shorrocks, A.F., The distribution of wealth. Atkinson, A.B., Bourguignon, F., (eds.) Handbook of Income Distribution, fourth ed., 2000, Elsevier, 605–675 Retrieved from https://doi.org/10.1016/S1574-0056(00)80014-7.
Elinder, M., Erixson, O., Waldenström, D., Inheritance and wealth inequality: evidence from population registers. J. Public. Econ. 165 (2018), 17–30 Retrieved from https://doi.org/10.1016/j.jpubeco.2018.06.012.
Engel, J., Riera, P.G., Grilli, J., Sola, P., Developing Reconciled Quarterly Distributional National Wealth–Insight into Inequality and Wealth Structures. Tech. Rep. No. 2687, 2022, European Central Bank, Francfort.
Essama-Nssah, B., Lambert, P.J., Influence functions for policy impact analysis. Inequality, Mobility and Segregation: Essays in Honor of Jacques Silber, 2012, Emerald Group Publishing Limited.
Fagereng, A., Guiso, L., Malacrino, D., Pistaferri, L., Heterogeneity and persistence in returns to wealth. Econometrica 88:1 (2020), 115–170 Retrieved from https://doi.org/10.3982/ECTA14835.
Fan, J., Gijbels, I., Local Polynomial Modelling and Its Applications, vol. 66, 1996, Chapman and Hall/CRC.
Feiveson, L., Sabelhaus, J., 2018. How Does Intergenerational Wealth Transmission Affect Wealth concentration? Tech. Rep. https://www.federalreserve.gov/econres/notes/feds-notes/how-does-intergenerational-wealth-transmission-affect-wealth-concentration-20180601.htm.
Fessler, P., Schürz, M., Private wealth across European countries: the role of income, inheritance and the welfare state. J. Human Dev. Capabil. 19:4 (2018), 521–549 Retrieved from https://doi.org/10.1080/19452829.2018.1507422.
Karagiannaki, E., The impact of inheritance on the distribution of wealth: evidence from Great Britain. Rev. Income Wealth 63:2 (2017), 394–408 Retrieved from http://doi.wiley.com/10.1111/roiw.12217.
Kennickell, A.B., The tail that wags: differences in effective right tail coverage and estimates of wealth inequality. J. Econ. Inequal. 17:4 (2019), 443–459 Retrieved from https://doi.org/10.1007/s10888-019-09424-8.
Kotlikoff, L.J., Summers, L.H., The role of intergenerational transfers in aggregate capital accumulation. J. Polit. Econ. 89:4 (1981), 706–732 Retrieved from https://doi.org/10.1086/260999.
Krenek, A., Schratzenstaller, M., Grünberger, K., Thiemann, A., Intaxmod: Inheritance and Gift Taxation in the Context of Ageing. Tech. Rep, 2022, WIFO Working Papers.
Meade, J., Efficiency, Equality and the Ownership of Property, 1964, Allen & Unwin, London.
Mirrlees, J., Adam, S., Besley, T., Blundell, R., Bond, S., Chote, R., et al. Tax by Design: The Mirrlees Review., 2011, Oxford University Press, Oxford.
Modigliani, F., The role of intergenerational transfers and life cycle saving in the accumulation of wealth. J. Econ. Perspect. 2:2 (1988), 15–40 Retrieved from http://doi.org/10.1257/jep.2.2.15.
Morelli, S., Asher, T., Di Biase, F., Disslbacher, F., Flores, I., Johnson, A.R., Targa, M., The GC Wealth Project Data Warehouse v.1 - Documentation. Tech. Rep. No. 75, 2023, Stone Center on Socio-Economic Inequality Working Paper Series.
Morelli, S., Nolan, B., Palomino, J.C., Van Kerm, P., Intergenerational transfers and the accumulation of wealth for low-income households in rich countries. J. Eur. Soc. Policy, 2021 Retrieved from https://doi.org/10.1177/09589287211040419.
Nekoei, A., Seim, D., How do inheritances shape wealth inequality? Theory and evidence from Sweden. Rev. Econ. Stud. 90:1 (2022), 463–498 Retrieved from https://doi.org/10.1093/restud/rdac016.
Nolan, B., Palomino, J.C., Van Kerm, P., Morelli, S., Intergenerational wealth transfers and wealth inequality in rich countries: what do we learn from Gini decomposition?. Econ. Lett., 199, 2021, 3.
Nolan, B., Palomino, J.C., Van Kerm, P., Morelli, S., Intergenerational wealth transfers in Great Britain from the wealth and assets survey in comparative perspective. Fisc. Stud., 2022 Retrieved from https://doi.org/10.1111/1475-5890.12299.
OECD. Inheritance Taxation in OECD Countries (No. 28), 2021, OECD Publishing, Paris Retrieved from https://doi.org/10.1787/e2879a7d-en (2022-03-29).
Palomino, J.C., Marrero, G.A., Nolan, B., Rodríguez, J.G., Wealth inequality, intergenerational transfers, and family background. Oxf. Econ. Pap., 2021, gpab052 Retrieved from https://doi.org/10.1093/oep/gpab052.
Piketty, T., On the long-run evolution of inheritance: France 1820–2050. Q. J. Econ. 126:3 (2011), 1071–1131.
Piketty, T., Capital and Ideology, 2020, Harvard University Press Retrieved from http://piketty.pse.ens.fr/fr/ideology.
Piketty, T., Postel-Vinay, G., Rosenthal, J.L., Inherited vs self-made wealth: theory & evidence from a rentier society (Paris 1872–1927). Explor. Econ. Hist. 51:1 (2014), 21–40 Retrieved from https://doi.org/10.1016/j.eeh.2013.07.004.
Piketty, T., Saez, E., A theory of optimal inheritance taxation. Econometrica 81:5 (2013), 1851–1886 Retrieved from http://doi.wiley.com/10.3982/ECTA10712.
Praestgaard, J., Wellner, J.A., Exchangeably weighted bootstraps of the general empirical process. Ann. Probab. 21:4 (1993), 2053–2086.
Rubin, D.B., The Bayesian bootstrap. Ann. Probab. 9:1 (1981), 130–134.
Rubin, D.B., Multiple Imputation for Nonresponse in Surveys, 1987, John Wiley and Sons, New York.
Salas-Rojo, P., Rodríguez, J.G., Inheritances and wealth inequality: a machine learning approach. J. Econ. Inequal. 20:1 (2022), 27–51 Retrieved from https://doi.org/10.1007/s10888-022-09528-8.
Stantcheva, S., Inequalities in the Times of a Pandemic. Working Paper No. 29657, 2022, National Bureau of Economic Research Retrieved from http://www.nber.org/papers/w29657.
Stark, O., Taylor, J.E., Yitzhaki, S., Remittances and inequality. Econ. J. 96:383 (1986), 722–740 Retrieved 2024-02-20, from http://www.jstor.org/stable/2232987.
Vermeulen, P., How fat is the top tail of the wealth distribution?. Rev. Income Wealth 64:2 (2017), 357–387.
Wolff, E.N., Inheritances and wealth inequality, 1989– 1998. Am. Econ. Rev. 92:2 (2002), 260–264 Retrieved from https://www.jstor.org/stable/3083413.
Wolff, E.N., Inheriting Wealth in America: Future Boom or Bust?, 2015, Oxford University Press, USA.
Wolff, E.N., Gittleman, M., Inheritances and the distribution of wealth or whatever happened to the great inheritance boom?. J. Econ. Inequal. 12:4 (2014), 439–468 Retrieved from https://doi.org/10.1007/s10888-013-9261-8.
