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The Carnegie Conjecture: Some Empirical Evidence

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  • Douglas Holtz-Eakin
  • David Joulfaian
  • Harvey S. Rosen

Abstract

This paper examines tax-return-generated data on the labor force behavior of people before and after they receive inheritances. The results are consistent with Andrew Carnegie's century-old assertion that large inheritances decrease a person's labor force participation. For example, a single person who receives an inheritance of about $150,000 is roughly four times more likely to leave the labor force than a person with an inheritance below $25,000. Additional, albeit weaker, evidence suggests that large inheritances depress labor supply, even when participation is unaltered. Warren Kendall … heir to an insurance company fortune … says he's worth about $5 million and has an income of "about, oh, $300 and some thousand a year." [H]e has never held a job, or wanted to. Going down to sea in cruise ships is his full-time pursuit. He estimates that he has taken about 250 cruises over the past couple of decades, spending at least 50 percent to 70 percent of the year afloat [Morgenthaler, 1991, p. Al].

Suggested Citation

  • Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "The Carnegie Conjecture: Some Empirical Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 413-435.
    • Handle: RePEc:oup:qjecon:v:108:y:1993:i:2:p:413-435.
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    File URL: http://hdl.handle.net/10.2307/2118337
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    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics

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