Bequests and Aggregate Wealth Accumulation in Germany
This paper estimates the proportion of current wealth in Germany which is generated by intergenerational bequests. It begins with the flow-of-bequests approach which cumulates annual flows of bequests into a stock of transfer wealth. Assuming exponential growth of the economy, inherited wealth accounts for about 35 per cent of total wealth in Germany, a figure comparable to that obtained for other countries. However, the assumptions underlying this estimate are inappropriate for Germany, because they fail to take account of the special circumstances of the postwar period. Modifying the flow-of-bequests method to allow for these special circumstances reduces the share of inherited wealth to about 10 per cent, surprisingly low in comparison to other countries.To confirm this result, a further method was developed based on a regression model of wealth as a function of socio-economic variables. The wealth of the nation is estimated with bequests included, and the contribution of bequests is then calculated by setting bequests equal to zero. This result again produces a share of about 10 per cent for inherited wealth, making this figure the most plausible value for Germany in the 1980s. However, the share can be expected to increase in future. The Geneva Papers on Risk and Insurance (1999) 24, 50–63. doi:10.1111/1468-0440.00004
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Volume (Year): 24 (1999)
Issue (Month): 1 (January)
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