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Wealth and Inheritance in Britain from 1896 to the Present

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  • A.B. Atkinson
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    Abstract

    There has been a large rise in the UK ratio of personal wealth to national income. Personal wealth has grown since the 1970s about twice as fast in real terms as national income. Has this rise in the wealth-income ratio led to a corresponding increase in the wealth being passed on from one generation to the next? Are we returning to the levels of inheritance found in the 19th century? In France, the research of Thomas Piketty has highlighted the return of inheritance. The aim of this paper is to construct comparable UK evidence on the extent of the transmission of wealth in the form of estates and, insofar as it is possible, gifts inter vivos. It takes a long-run view of inheritance, starting from 1896, when the modern Estate Duty was introduced and exploits the extensive estate data published over the years in the UK. Construction of a long-run time series for more than a century is challenging, and there are important limitations to the resulting estimates which are discussed extensively in the paper. The resulting time-series demonstrates the major importance of inheritance in the UK before the First World War, when the total transmitted wealth represented some 20 per cent when expressed relative to net national income. In the inter-war period, the total was around 15 per cent, falling to some 10 per cent after the Second World War, and then falling further to below 5 per cent in the late 1970s. Since then, there has indeed been an upturn, although less marked than in France: a rise from 4.8 per cent in 1977 to 8.2 per cent in 2006. This increase was more or less in line with the increase in personal wealth, and has to be interpreted in the light of the changing net worth of the corporate and public sectors of the economy.

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    File URL: http://sticerd.lse.ac.uk/dps/case/cp/casepaper178.pdf
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    Bibliographic Info

    Paper provided by Centre for Analysis of Social Exclusion, LSE in its series CASE Papers with number /178.

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    Date of creation: Nov 2013
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    Handle: RePEc:cep:sticas:/178

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    Web page: http://sticerd.lse.ac.uk/case/_new/publications/default.asp

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    Keywords: wealth; inheritance; estate data;

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    1. Dunn, A T & Hoffman, P D R B, 1983. "Distribution of Wealth in the United Kingdom: Effect of Including Pension Rights and Analysis by Age-Group," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 29(3), pages 243-82, September.
    2. David Blake & J. Michael Orszag, 1999. "Annual estimates of personal wealth holdings in the United Kingdom since 1948," Applied Financial Economics, Taylor & Francis Journals, vol. 9(4), pages 397-421.
    3. Anthony B. Atkinson & Salvatore Morelli, 2014. "Chartbook of economic inequality," Working Papers 324, ECINEQ, Society for the Study of Economic Inequality.
    4. Atkinson, Anthony B & Gordon, James P F & Harrison, Alan, 1989. "Trends in the Shares of Top Wealth-Holders in Britain, 1923-1981," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 315-32, August.
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    Cited by:
    1. Abraham, Martin & Lorek, Kerstin & Richter, Friedemann & Wrede, Matthias, 2014. "Strictness of tax compliance norms: A factorial survey on the acceptance of inheritance tax evasion in Germany," IWQW Discussion Paper Series 07/2014, Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW).

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