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Inheritance and wealth inequality: Evidence from population registers

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  • Elinder, Mikael
  • Erixson, Oscar
  • Waldenström, Daniel

Abstract

This paper uses population register data on inheritances and wealth in Sweden to estimate the causal impact of inheritances on wealth inequality. We find that inheritances reduce wealth inequality, as measured by the Gini coefficient or top wealth shares, but that they increase absolute dispersion. This duality in effects stems from the fact that even though richer heirs inherit larger amounts, the relative importance of the inheritance is larger for less wealthy heirs, who inherit more relative to their pre-inheritance wealth. This is in part driven by the fact that heirs do not inherit debts, which makes the distribution of inheritances more equal than the distribution of wealth among the heirs. Behavioral adjustments seem to mitigate the equalizing effect of inheritances, possibly through higher consumption among the poorer heirs. Inheritance taxation counteracts the equalizing inheritance effect, but redistribution of inheritance tax revenues can reverse this result and make the inheritance tax equalizing. Finally, we also find that inheritances increase intragenerational wealth mobility, but the effect is short-lived.

Suggested Citation

  • Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2018. "Inheritance and wealth inequality: Evidence from population registers," Journal of Public Economics, Elsevier, vol. 165(C), pages 17-30.
  • Handle: RePEc:eee:pubeco:v:165:y:2018:i:c:p:17-30
    DOI: 10.1016/j.jpubeco.2018.06.012
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    Cited by:

    1. Marius Brülhart & Didier Dupertuis & Elodie Moreau, 2018. "Inheritance flows in Switzerland, 1911–2011," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 154(1), pages 1-13, December.
    2. Simon Halphen Boserup & Wojciech Kopczuk & Claus Thustrup Kreiner, 2018. "Born with a Silver Spoon? Danish Evidence on Wealth Inequality in Childhood," Economic Journal, Royal Economic Society, vol. 128(612), pages 514-544, July.
    3. Adrian Adermon & Mikael Lindahl & Daniel Waldenström, 2018. "Intergenerational Wealth Mobility and the Role of Inheritance: Evidence from Multiple Generations," Economic Journal, Royal Economic Society, vol. 128(612), pages 482-513, July.
    4. Bastani, Spencer & Waldenström, Daniel, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," IZA Discussion Papers 11475, Institute for the Study of Labor (IZA).
    5. Mathias Moser & Stefan Humer & Matthias Schnetzer, 2016. "Bequests and the accumulation of wealth in the Eurozone," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 149, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    6. Garbinti, Bertrand & Goupille-Lebret, Jonathan & Piketty, Thomas, 2017. "Accounting for Wealth Inequality Dynamics: Methods, Estimates and Simulations for France (1800-2014)," CEPR Discussion Papers 11848, C.E.P.R. Discussion Papers.
    7. repec:spr:jopoec:v:30:y:2017:i:4:d:10.1007_s00148-017-0651-2 is not listed on IDEAS
    8. Kopczuk, Wojciech, 2016. "U.S. capital gains and estate taxation: a status report and directions for a reform," CEPR Discussion Papers 11208, C.E.P.R. Discussion Papers.
    9. Yoko Niimi & Charles Yuji Horioka, 2016. "The Impact of Intergenerational Transfers on Household Wealth Inequality in Japan and the United States," NBER Working Papers 22687, National Bureau of Economic Research, Inc.
    10. Simon H. Boserup & Wojciech Kopczuk & Claus T. Kreiner, 2016. "The Role of Bequests in Shaping Wealth Inequality: Evidence from Danish Wealth Records," American Economic Review, American Economic Association, vol. 106(5), pages 656-661, May.
    11. Sommer, Eric, 2017. "Wealth Transfers and Tax Planning: Evidence for the German Bequest Tax," IZA Discussion Papers 11120, Institute for the Study of Labor (IZA).
    12. Stefan Jestl, "undated". "Inheritance tax regimes," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 176, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    13. repec:eee:pubeco:v:168:y:2018:i:c:p:21-34 is not listed on IDEAS
    14. Goupille-Lebret, Jonathan & Infante, Jose, 2018. "Behavioral responses to inheritance tax: Evidence from notches in France," Journal of Public Economics, Elsevier, vol. 168(C), pages 21-34.
    15. repec:ces:ifodic:v:16:y:2018:i:2:p:50000000002754 is not listed on IDEAS
    16. Bönke, Timm & Werder, Marten v. & Westermeier, Christian, 2017. "How inheritances shape wealth distributions: An international comparison," Economics Letters, Elsevier, vol. 159(C), pages 217-220.
    17. Garbinti, Bertrand & Georges-Kot, Simon, 2019. "On the retirement effect of inheritance: heterogeneity and the role of risk aversion," Working Paper Series 2222, European Central Bank.
    18. Oscar Erixson, 2017. "Health responses to a wealth shock: evidence from a Swedish tax reform," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(4), pages 1281-1336, October.
    19. 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.
    20. Stefan Humer & Mathias Moser & Matthias Schnetzer, 2017. "Inheritances and the Accumulation of Wealth in the Eurozone," ICAE Working Papers 73, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    21. 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.
    22. repec:nbp:nbpbik:v:48:y:2017:i:3:p:295-326 is not listed on IDEAS

    More about this item

    Keywords

    Bequests; Estates; Net worth; Inheritance taxation; Wealth distribution;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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