Working Paper: NBER ID: w28230
Authors: Charlotte Bartels; Simon Jäger; Natalie Obergruber
Abstract: What are the long-term economic effects of a more equal distribution of wealth? We exploit variation in historical inheritance rules for land traversing political, linguistic, geological, and religious borders in Germany. In some German areas, inherited land was to be shared or divided equally among children, while in others land was ruled to be indivisible. Using a geographic regression discontinuity design, we show that equal division of land led to a more equal distribution of land; other potential drivers of growth are smooth at the boundary and equal division areas were not historically more developed. Today, equal division areas feature higher average incomes and a right-shifted skill, income, and wealth distribution. Higher top incomes and top wealth in equal division areas coincide with higher education, and higher labor productivity. We show evidence consistent with the more even distribution of land leading to more innovative industrial by-employment during Germany’s transition from an agrarian to an industrial economy and, in the long-run, more entrepreneurship.
Keywords: No keywords provided
JEL Codes: E02; H24; J24; J43; N13; N14; N23; N24; N33; N34; N53; N54; N93; N94; O3; P42; R52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Equal division of agricultural land (Q15) | More even distribution of wealth (D39) |
| More even distribution of wealth (D39) | Higher income and GDP levels (O49) |
| More even distribution of wealth (D39) | Greater variety of economic activities during industrialization (N11) |
| Greater variety of economic activities during industrialization (N11) | More dispersed income distribution today (D39) |
| More even distribution of land (D30) | Higher top incomes and wealth (D31) |
| Higher top incomes and wealth (D31) | Greater educational attainment and labor productivity (J24) |
| Equal division areas (D30) | Higher rates of industrial by-employment and entrepreneurship (L26) |
| Occupational choices differ significantly (J29) | More individuals in equal division areas engaging in manufacturing and innovative sectors (O49) |