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Parental Death, Inheritance, and Labor Supply in the United States

Author

Listed:
  • Elif Tasar
  • John Voorheis

Abstract

We are the first to study how inheritances affect labor supply in the U.S. using large-scale administrative data. Leveraging federal tax and Social Security records, we estimate event studies around parental death to investigate impacts on adult children. Our results indicate that the death of a last parent causes sizable gains in investment income—our main proxy for inheritances—and proportionate reductions in labor supply. On average, annual per-adult investment income at the tax unit level increases by about $300 (45 percent) and annual per-adult wage earnings decrease by $600 (2 percent). These earnings responses are large relative to the implied wealth transfer. Income effects are the dominant channel through which parental death reduces earnings, with children of wealthier parents exhibiting larger earnings reductions. Over six years, inheritances slightly equalize the distribution of investment income.

Suggested Citation

  • Elif Tasar & John Voorheis, 2025. "Parental Death, Inheritance, and Labor Supply in the United States," Working Papers 25-71, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:25-71
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    File URL: https://www2.census.gov/library/working-papers/2025/adrm/ces/CES-WP-25-71.pdf
    File Function: First version, 2025
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    Keywords

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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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