Working Paper: CEPR ID: DP16940
Authors: Sandra Black; Paul J. Devereux; Fanny Landaud; Kjell G. Salvanes
Abstract: Transfers from parents—either in the form of gifts or inheritances—have received much attention as a source of inequality. This paper uses a 19-year panel of administrative data for the population of Norway to examine the share of the Total Inflows available to an individual (defined as the capitalized sum of net labor income, government transfers, and gifts and inheritances received over the period) accounted for by capitalized gifts and inheritances. Perhaps surprisingly, we find that gifts and inheritances represent a small share of Total Inflows; this is true across the distribution of Total Inflows, as well as at all levels of net wealth at a point in time. Gifts and inheritances are only an important source of income flows among those who have very wealthy parents. Additionally, gifts and inheritances have very little effect on the distribution of Total Inflows – when we do a counterfactual Total Inflows distribution with zero gifts and inheritances, it is not much different from the actual distribution. Our findings suggest that inheritance taxes may do little to mitigate the extreme wealth inequality in society.
Keywords: intergenerational transmission; inheritances and gifts; wealth inequality
JEL Codes: G5; J01; J1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| gifts and inheritances (H24) | total inflows (F21) |
| labor income and government transfers (J39) | total inflows (F21) |
| gifts and inheritances (H24) | wealth accumulation (E21) |
| inheritance taxes (H24) | wealth inequality (D31) |
| removing gifts and inheritances (H24) | distribution of total inflows (D39) |