Wealth inequality, intergenerational transfers and socioeconomic background

Working Paper 2020-537

Abstract

This paper estimates the contribution of intergenerational transfers (inheritances and gifts) and socioeconomic background to wealth inequality in four OECD countries: France, Spain, Great Britain and the United States. We generate a non-parametric counterfactual distribution where all differences in wealth associated with the intergenerational transfers received and the socioeconomic background have been removed. Despite the diversity of the four countries analysed, we find similar patterns in the results. The combined contribution of intergenerational transfers and socioeconomic background to wealth inequality is sizeable in all four countries studied, ranging from 37% in Great Britain to 48% in the US. When interactions between the two factors are controlled for, the net contribution of inheritances and gifts is between 23% and 30%, while the net contribution of family background lies between 4% and 11%. These values are substantial and reveal that the importance of intergenerational transfers in all these countries is at least twice that of socioeconomic background.

Authors: Juan C. Palomino, Gustavo A. Marrero, Brian Nolan, Juan G. Rodriguez.