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The Effect of Inheritance Receipt on Labor and Capital Income: Evidence from Swedish Panel Data

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Author Info

  • Elinder, Mikael

    ()
    (Uppsala Center for Fiscal Studies)

  • Erixson, Oscar

    ()
    (Uppsala Center for Fiscal Studies)

  • Ohlsson, Henry

    ()
    (Uppsala Center for Fiscal Studies)

Abstract

In this paper we study the effects of inheritances on labor and capital income of heirs. We use unique register based Swedish panel data to estimate both short run and medium run responses. The few existing studies have mainly focused on short run responses, using data from the U.S. Models of life cycle consumption stress that anticipated and unanticipated income changes have different impacts on the optimal consumption path. In Sweden, as in other countries with extensive public insurances and succession rules that prohibit decedents from bequeathing the entire estate to others than their children, inheritances are likely to be anticipated to a higher degree than in the U.S. Our estimates suggest that there is a negative effect of inheriting on labor income in the year of the receipt and the year after, and that the negative effect is even larger two to three years after receiving the inheritance. Moreover, we find that capital income increases by an amount corresponding to wealth increasing at least by the amount inherited.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2010:3.

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Length: 28 pages
Date of creation: 27 Apr 2010
Date of revision:
Publication status: Published as Elinder, Mikael, Oscar Erixson and Henry Ohlsson, 'The Effect of Inheritance Receipt on Labor and Capital Income: Evidence from Swedish Panel Data' in The impact of inheritances on heirs’ labor and capital income' in B.E. Journal of Economic Analysis & Policy, 2012.
Handle: RePEc:hhs:uufswp:2010_003

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: inheritances; bequests; windfall gains; labor supply; capital income; uncertainty;

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Cited by:
  1. Elinder, Mikael & Erixson, Oscar & Ohlsson, Henry, 2010. "The Effect of Inheritance Receipt on Labor and Capital Income: Evidence from Swedish Panel Data," Working Paper Series, Center for Fiscal Studies 2010:3, Uppsala University, Department of Economics.
  2. Wojciech Kopczuk, 2012. "Taxation of Intergenerational Transfers and Wealth," NBER Working Papers 18584, National Bureau of Economic Research, Inc.

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