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Labour Supply after Inheritances and the Role of Expectations

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  • Karina Doorley
  • Nico Pestel

Abstract

This paper examines the effect of inheritances on labour supply, distinguishing between unanticipated and anticipated inheritances. We use household and individual level micro‐data for Germany to investigate the effect of inheritances on a number of labour market outcomes. Women are less likely to work full‐time after an inheritance and their desired and actual hours of work decrease by 1–2 per week, on average. The magnitude of the effect is found to be larger and more precisely estimated for households without children and liquidity constrained households. Other margins such as time use outside the labour market and satisfaction are also found to be affected by inheritance receipt.

Suggested Citation

  • Karina Doorley & Nico Pestel, 2020. "Labour Supply after Inheritances and the Role of Expectations," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(4), pages 843-863, August.
    • Handle: RePEc:bla:obuest:v:82:y:2020:i:4:p:843-863
    DOI: 10.1111/obes.12353
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    Cited by:

    1. Horioka, Charles Yuji & Gahramanov, Emin & Hayat, Aziz & Tang, Xueli, 2021. "The impact of bequest motives on labor supply and retirement behavior in Japan: A theoretical and empirical analysis," Journal of the Japanese and International Economies, Elsevier, vol. 62(C).
    2. Adrian Chadi, 2017. "There Is No Place like Work: Evidence on Health and Labor Market Behavior from Changing Weather Conditions," IAAEU Discussion Papers 201709, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    3. Stefan Jestl, 2021. "Inheritance tax regimes: a comparison," Public Sector Economics, Institute of Public Finance, vol. 45(3), pages 363-385.
    4. Sommer, Eric, 2017. "Wealth Transfers and Tax Planning: Evidence for the German Bequest Tax," IZA Discussion Papers 11120, Institute of Labor Economics (IZA).
    5. Kindermann, Fabian & Mayr, Lukas & Sachs, Dominik, 2020. "Inheritance taxation and wealth effects on the labor supply of heirs," Journal of Public Economics, Elsevier, vol. 191(C).
    6. Stefania Basiglio & Mariacristina Rossi & Arthur, 2019. "“Subjective inheritance expectations and economic outcomes”," CeRP Working Papers 190, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    7. Malo, Miguel Á. & Sciulli, Dario, 2023. "Expected wealth transfers and consumption across the wealth distribution in Europe," Economic Modelling, Elsevier, vol. 126(C).
    8. Charles Yuji Horioka & Emin Gahramanov & Aziz Hayat & Xueli Tang, 2019. "The Impact of Bequest Motives on Retirement Behavior in Japan: A Theoretical and Empirical Analysis," Discussion Paper Series DP2019-26, Research Institute for Economics & Business Administration, Kobe University.
    9. Niizeki, Takeshi & Hori, Masahiro, 2019. "The effect of inheritance receipt on individual labor supply: Evidence from Japanese microdata," Japan and the World Economy, Elsevier, vol. 49(C), pages 176-186.
    10. Xiaoguang Ling, 2022. "Heterogeneous earning responses to inheritance: new event-study evidence from Norway," Papers 2209.10256, arXiv.org, revised Nov 2022.
    11. Dionissi Aliprantis & Daniel R. Carroll & Eric Young, 2019. "The Dynamics of the Racial Wealth Gap," Working Papers 19-18R, Federal Reserve Bank of Cleveland, revised 29 Nov 2022.
    12. Aviad Tur-Sinai & Harald Künemund & Claudia Vogel, 2022. "Inheritances and work for pay — will the expected wave of bequests undermine active ageing policies?," European Journal of Ageing, Springer, vol. 19(4), pages 1251-1261, December.
    13. Crusius, Tobias L. & von Werder, Marten, 2017. "The affluency to quit: How inheritances affect retirement plannings," Discussion Papers 2017/24, Free University Berlin, School of Business & Economics.
    14. von Werder, Marten, 2018. "Intergenerational transfers: How do they shape the German wealth distribution?," Discussion Papers 2018/15, Free University Berlin, School of Business & Economics.
    15. Margit Schratzenstaller, 2023. "Behavioral Responses to Inheritance Taxation. A Review of the Empirical Literature," WIFO Working Papers 668, WIFO.
    16. Eduard Suari-Andreu, 2023. "Labour supply, retirement, and consumption responses of older Europeans to inheritance receipt," Empirical Economics, Springer, vol. 64(1), pages 33-75, January.
    17. Basiglio, Stefania, 2018. "Essays on financial behaviour of households and firms," Other publications TiSEM c13423c5-8bf2-44a7-baa7-3, Tilburg University, School of Economics and Management.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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