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The Role of Bequests in Shaping Wealth Inequality: Evidence from Danish Wealth Records

Author

Listed:
  • Simon H. Boserup
  • Wojciech Kopczuk
  • Claus T. Kreiner

Abstract

Using Danish administrative data, we estimate the impact of bequests on the level and inequality of wealth. We employ an event study design where we follow the distribution of wealth over time of people who are 45-50 years old, and divide them into treatment group and control group depending on whether a parent dies or not. Bequests account for 26 percent of the average post-bequest wealth 1-3 years after parental death and significantly affect wealth throughout the distribution. We find that bequests increase measures of absolute wealth inequality (variance), but reduce relative inequality (top wealth shares). Following the receipt of bequests, variance of the distribution censored at the top/bottom 1% increases by 33 percent, but the top 1% share declines by 6 percentage points from an initial level of 31 percent and the top 10% share declines by 10 percentage points from a base of around 81 percent.

Suggested Citation

  • Simon H. Boserup & Wojciech Kopczuk & Claus T. Kreiner, 2016. "The Role of Bequests in Shaping Wealth Inequality: Evidence from Danish Wealth Records," NBER Working Papers 21896, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21896
    Note: AG EFG PE
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    References listed on IDEAS

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    1. Wojciech Kopczuk, 2007. "Bequest and Tax Planning: Evidence from Estate Tax Returns," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1801-1854.
    2. Thomas Piketty, 2011. "On the Long-Run Evolution of Inheritance: France 1820--2050," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(3), pages 1071-1131.
    3. Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2018. "Inheritance and wealth inequality: Evidence from population registers," Journal of Public Economics, Elsevier, vol. 165(C), pages 17-30.
    4. Søren Leth-Petersen, 2010. "Intertemporal Consumption and Credit Constraints: Does Total Expenditure Respond to an Exogenous Shock to Credit?," American Economic Review, American Economic Association, vol. 100(3), pages 1080-1103, June.
    5. Wojciech Kopczuk, 2015. "What Do We Know about the Evolution of Top Wealth Shares in the United States?," Journal of Economic Perspectives, American Economic Association, vol. 29(1), pages 47-66, Winter.
    6. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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