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Poor Little Rich Kids? - The Determinants of the Intergenerational Transmission of Wealth

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  • Sandra E. Black
  • Paul J. Devereux
  • Petter Lundborg
  • Kaveh Majlesi

Abstract

Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for genetics. We also examine the role played by bequests and find that, when they are taken into account, the role of adoptive parental wealth becomes much stronger. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth.

Suggested Citation

  • Sandra E. Black & Paul J. Devereux & Petter Lundborg & Kaveh Majlesi, 2015. "Poor Little Rich Kids? - The Determinants of the Intergenerational Transmission of Wealth," Working Papers 201516, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:201516
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    File URL: http://hdl.handle.net/10197/7150
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth By: Black, Sandra E. (University of Texas at Austin) ; Devereux, Paul J. (University College Dublin) ; Lundborg, Petter (Lund University) ; Majlesi, Kaveh
      by maximorossi in NEP-LTV blog on 2015-08-17 19:31:43
    2. Poor Little Rich Kids? – The Determinants of the Intergenerational Transmission of Wealth
      by maximorossi in NEP-LTV blog on 2015-11-06 23:05:45

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    Cited by:

    1. Xu, Yilan & Briley, Daniel A. & Brown, Jeffrey R. & Roberts, Brent W., 2017. "Genetic and environmental influences on household financial distress," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 404-424.
    2. Lindahl, Mikael & Lundberg, Evelina & Palme, Mårten & Simeonova, Emilia, 2016. "Parental Influences on Health and Longevity: Lessons from a Large Sample of Adoptees," Working Paper Series, Center for Labor Studies 2016:3, Uppsala University, Department of Economics.
    3. 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.
    4. Dionissi Aliprantis & Daniel R. Carroll, 2018. "Neighborhood dynamics and the distribution of opportunity," Quantitative Economics, Econometric Society, vol. 9(1), pages 247-303, March.
    5. Andreas Fagereng & Luigi Guiso & Davide Malacrino & Luigi Pistaferri, 2020. "Heterogeneity and Persistence in Returns to Wealth," Econometrica, Econometric Society, vol. 88(1), pages 115-170, January.
    6. 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.
    7. David (David Patrick) Madden, 2020. "The Socioeconomic Gradient of Cognitive Test Scores: Evidence from Two Cohorts of Irish Children," Working Papers 202020, School of Economics, University College Dublin.
    8. Winfried Koeniger & Julien Prat, 2018. "Human Capital and Optimal Redistribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 27, pages 1-26, January.
    9. Jo Blanden & Andrew Eyles & Stephen Machin, 2021. "Trends in Intergenerational Home Ownership and Wealth Transmission," CEPEO Working Paper Series 21-05, Centre for Education Policy and Equalising Opportunities, UCL Institute of Education, revised May 2021.
    10. Guido Neidhöfer, 2019. "Intergenerational mobility and the rise and fall of inequality: Lessons from Latin America," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(4), pages 499-520, December.
    11. Warn N. Lekfuangfu & Reto Odermatt, 2020. "All I have to do is dream? The role of aspirations in intergenerational mobility and well-being," PIER Discussion Papers 142, Puey Ungphakorn Institute for Economic Research, revised Jul 2020.
    12. Knüpfer, Samuli & Rantapuska, Elias & Sarvimäki, Matti, 2017. "Why does portfolio choice correlate across generations," Research Discussion Papers 25/2017, Bank of Finland.
    13. Andreas Fagereng & Magne Mogstad & Marte Rønning, 2021. "Why Do Wealthy Parents Have Wealthy Children?," Journal of Political Economy, University of Chicago Press, vol. 129(3), pages 703-756.
    14. M. Shahe Emran & William Greene & Forhad Shilpi, 2018. "When Measure Matters: Coresidency, Truncation Bias, and Intergenerational Mobility in Developing Countries," Journal of Human Resources, University of Wisconsin Press, vol. 53(3), pages 589-607.
    15. 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.
    16. Hällsten, Martin & Pfeffer, Fabian T., 2017. "Grand advantage: family wealth and grandchildren's educational achievement in Sweden," Working Paper Series 2017:3, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    17. Jing You & Miguel Niño‐Zarazúa, 2019. "The Intergenerational Impact of China's New Rural Pension Scheme," Population and Development Review, The Population Council, Inc., vol. 45(S1), pages 47-95, December.
    18. Ager, Philipp & Boustan, Leah & Eriksson, Katherine, 2019. "The intergenerational effects of a large wealth shock: White southerners after the Civil War," CEPR Discussion Papers 13660, C.E.P.R. Discussion Papers.
    19. Jo Blanden & Stephen Machin, 2017. "Home Ownership and Social Mobility," CEP Discussion Papers dp1466, Centre for Economic Performance, LSE.
    20. Rauscher, Emily, 2017. "Plastic and Immobile," OSF Preprints cjweu, Center for Open Science.
    21. Christiane Gross & Kerstin Lorek & Friedemann Richter, 2017. "Attitudes towards inheritance taxation – results from a survey experiment," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(1), pages 93-112, March.
    22. Jing You & Miguel Niño-Zarazúa, 2017. "Smoothing or strengthening the ‘Great Gatsby Curve’? The intergenerational impact of China’s New Rural Pension Scheme," WIDER Working Paper Series 199, World Institute for Development Economic Research (UNU-WIDER).
    23. Jing You & Miguel Niño-Zarazúa, 2017. "Smoothing or strengthening the 'Great Gatsby curve'?: The intergenerational impact of China's New Rural Pension Scheme," WIDER Working Paper Series wp-2017-199, World Institute for Development Economic Research (UNU-WIDER).
    24. Haile, Getinet Astatike, 2016. "Intergenerational Mobility in Income and Economic Status in Ethiopia," IZA Discussion Papers 10047, Institute of Labor Economics (IZA).
    25. Driouchi, Ahmed & Gamar, Alae, 2016. "The Gap between Educational & Social Intergenerational Mobility in Arab Countries," MPRA Paper 73998, University Library of Munich, Germany.

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    More about this item

    Keywords

    Nature versus nurture; Wealth transmission;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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