IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Wealth Inequality and Intergenerational Links

  • Mariacristina deNardi

    (Federal Reserve Bank of Chicago)

Empirical studies have shown that, for many countries, the distribution of wealth is much more concentrated than the one of labor earnings and that households with higher levels of lifetime income have higher lifetime saving rates. Previous models have had difficulty in generating these features. I construct a computable general equilibrium model with overlapping generations in which parents and children are linked by bequests and earnings persistence within families. I show that voluntary bequests are important to explain the emergence of large estates that characterize the top of the wealth distribution, while accidental bequests are not. In addition, the introduction of a bequest motive generates lifetime saving profiles more consistent with the data. Allowing for earnings persistence within families generates an even more concentrated wealth distribution. A cross-country comparison between the U.S. and Sweden shows that intergenerational linkages are important to explain the upper tail of the wealth distribution also in economies where redistribution programs are more prominent and there is less inequality. Moreover Sweden, with its generous social safety net, has a larger fraction of people with zero or negative wealth. The model is capable of reproducing this feature as well.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: main text
Download Restriction: no

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0547.

in new window

Date of creation: 01 Aug 2000
Date of revision:
Handle: RePEc:ecm:wc2000:0547
Contact details of provider: Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Gary S. Becker & Nigel Tomes, . "Human Capital and the Rise and Fall of Families," University of Chicago - Population Research Center 84-10, Chicago - Population Research Center.
  2. Aaron, Henry J. & Munnell, Alicia H., 1992. "Reassessing the Role for Wealth Transfer Taxes," National Tax Journal, National Tax Association, vol. 45(2), pages 119-43, June.
  3. Lillard, Lee A & Willis, Robert J, 1978. "Dynamic Aspects of Earning Mobility," Econometrica, Econometric Society, vol. 46(5), pages 985-1012, September.
  4. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December.
  5. Orazio Attanasio & James Banks & Costas Meghir & Guglielmo Weber, 1995. "Humps and bumps in lifetime consumption," IFS Working Papers W95/14, Institute for Fiscal Studies.
  6. Vincenzo Quadrini, 2000. "Entrepreneurship, Saving and Social Mobility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 1-40, January.
  7. James B. Davies, 1982. "The Relative Impact of Inheritance and Other Factors on Economic Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 97(3), pages 471-498.
  8. W. G. Gale & J. K. Scholz, . "Intergenerational transfers and the accumulation of wealth," Institute for Research on Poverty Discussion Papers 1019-93, University of Wisconsin Institute for Research on Poverty.
  9. Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999. "Consumption Over the Life Cycle," NBER Working Papers 7271, National Bureau of Economic Research, Inc.
  10. Jagadeesh Gokhale & Laurence J. Kotlikoff & James Sefton & Martin Weale, 1999. "Simulating the Transmission of Wealth Inequity via Bequests," NBER Working Papers 7183, National Bureau of Economic Research, Inc.
  11. Ana Castañeda & Javier Díaz-Giménez & José-Víctor Ríos-Rull, . ""Earnings and Wealth Inequality and Income Taxation: Quantifying the Trade-Offs of Switching to a Proportional Income Tax in the U.S.''," CARESS Working Papres 98-14, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  12. Heer, Burkhard, 2000. "Wealth Distribution and Optimal Inheritance Taxation in Life-Cycle Economies with Intergenerational Transfers," Discussion Papers in Economics 25, University of Munich, Department of Economics.
  13. R. Glenn Hubbard & Jonathan Skinner & Stephen P. Zeldes, 1994. "Precautionary Saving and Social Insurance," NBER Working Papers 4884, National Bureau of Economic Research, Inc.
  14. Hansson, B., 1989. "Construction Of Swedish Capital Stocks, 1963-87: An Application Of The Hulten-Wykoff Studies," Papers 1989d, Uppsala - Economic Studies.
  15. Laitner, John, 1992. "Random earnings differences, lifetime liquidity constraints, and altruistic intergenerational transfers," Journal of Economic Theory, Elsevier, vol. 58(2), pages 135-170, December.
  16. Mariacristina De Nardi & Liqian Ren & Chao Wei, 2000. "Income inequality and redistribution in five countries," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 2-20.
  17. Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, vol. 87(5), pages 1009-18, December.
  18. Michael D. Hurd & James P. Smith, 1999. "Anticipated and Actual Bequests," NBER Working Papers 7380, National Bureau of Economic Research, Inc.
  19. James Poterba, 1998. "Estate and Gift Taxes and Incentives for Inter Vivos Giving in the United States," NBER Working Papers 6842, National Bureau of Economic Research, Inc.
  20. Shinichi Nishiyama, 2000. "Measuring Time Preference and Parental Altruism: Technical Paper 2000-7," Working Papers 13333, Congressional Budget Office.
  21. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
  22. Michael Sattinger (ed.), 2001. "Income Distribution," Books, Edward Elgar Publishing, volume 0, number 2018, 10.
  23. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  24. Tauchen, George & Hussey, Robert, 1991. "Quadrature-Based Methods for Obtaining Approximate Solutions to Nonlinear Asset Pricing Models," Econometrica, Econometric Society, vol. 59(2), pages 371-96, March.
  25. Huggett, Mark, 1996. "Wealth distribution in life-cycle economies," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 469-494, December.
  26. Hansen, G D, 1993. "The Cyclical and Secular Behaviour of the Labour Input: Comparing Efficiency Units and Hours Worked," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(1), pages 71-80, Jan.-Marc.
  27. Krusell, Per & Smith, Anthony A., 1997. "Income And Wealth Heterogeneity, Portfolio Choice, And Equilibrium Asset Returns," Macroeconomic Dynamics, Cambridge University Press, vol. 1(02), pages 387-422, June.
  28. Laurence J. Kotlikoff & Lawrence H. Summers, 1980. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," NBER Working Papers 0445, National Bureau of Economic Research, Inc.
  29. repec:cup:macdyn:v:1:y:1997:i:2:p:387-422 is not listed on IDEAS
  30. Davies, James B. & Shorrocks, Anthony F., 2000. "The distribution of wealth," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 11, pages 605-675 Elsevier.
  31. Laurence J. Kotlikoff & Kent Smetters & Jan Walliser, 1999. "Privatizing Social Security in the U.S. -- Comparing the Options," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 532-574, July.
  32. Christopher D Carroll, 1997. "Why Do the Rich Save So Much?," Economics Working Paper Archive 388, The Johns Hopkins University,Department of Economics.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:0547. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.