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Bequests and labor supply in Germany

  • Peters, Heiko
  • Schwarz, Peter

Little is known on the effects of inheritances on the working behavior of heirs. Using panel data for Germany, we find behavioral responses that amount up to a 16% reduction in working hours for inheritances of one Mio Euro. For the majority of beneficiaries labor supply effects are, however, modest (owing to small amounts of inherited wealth). These results remain robust if we restrict the sample solely on those persons receiving an inheritance. Although more modest, higher inheritances promote a stronger adjustment in labor supply compared to small inheritances. In contrast to previous studies the partner does not adjust working hours and the full response takes place in the phase of the inheritance. Although negative income effects are present for all types of inheritances, behavioral responses are stronger if the heir receives liquid assets. The results depend, however, critically on the choice of the control group.

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Paper provided by University of Bremen, Collaborative Research Center 597: Transformations of the State in its series TranState Working Papers with number 173.

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Date of creation: 2013
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Handle: RePEc:zbw:sfb597:173
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  1. Stark, Oded, 1998. "Equal bequests and parental altruism: compatibility or orthogonality?," Economics Letters, Elsevier, vol. 60(2), pages 167-171, August.
  2. Douglas Holtz-Eakin & David Joulfaian & Harvey Rosen, 1993. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Working Papers 698, Princeton University, Department of Economics, Industrial Relations Section..
  3. Schäfer, Dorothea & Talavera, Oleksandr & Weir, Charlie, 2010. "Entrepreneurship, Windfall Gains and Financial Constraints: Evidence from Germany," JIBS Working Papers 2010-3, Jönköping International Business School.
  4. Lindh, Thomas & Ohlsson, Henry, 1996. "Self-Employment and Windfall Gains: Evidence from the Swedish Lottery," Economic Journal, Royal Economic Society, vol. 106(439), pages 1515-26, November.
  5. Alberto Alesina & Edward L. Glaeser & Bruce Sacerdote, 2005. "Work and Leisure in the U.S. and Europe: Why So Different?," NBER Working Papers 11278, National Bureau of Economic Research, Inc.
  6. Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 111-132, Fall.
  7. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
  8. Dorothea Schäfer & Oleksandr Talavera, 2006. "Small-Scale Business Survival and Inheritance: Evidence from Germany," Discussion Papers of DIW Berlin 636, DIW Berlin, German Institute for Economic Research.
  9. Beckert, Jens, 2010. "Are we still modern? Inheritance law and the broken promise of the enlightenment," MPIfG Working Paper 10/7, Max Planck Institute for the Study of Societies.
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