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Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth

Black, Sandra E.; Devereux, Paul J.; Lundborg, Petter LU and Majlesi, Kaveh LU (2015) In Working Paper / Department of Economics, School of Economics and Management, Lund University
Abstract
Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for pre-birth factors. We also examine the role played by bequests and find that, when they are taken into account, the role of adoptive parental wealth becomes much stronger. We... (More)
Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for pre-birth factors. We also examine the role played by bequests and find that, when they are taken into account, the role of adoptive parental wealth becomes much stronger. We find very little evidence that education or earnings of parents or children are important drivers of the intergenerational wealth relationship between children and their adoptive parents. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
portfolio allocation, intergenerational mobility, nature versus nurture
in
Working Paper / Department of Economics, School of Economics and Management, Lund University
issue
21
pages
41 pages
publisher
Department of Economics, Lund Universtiy
language
English
LU publication?
yes
id
03f67131-9d85-4228-bd10-519d1e954eba (old id 7761162)
alternative location
http://swopec.hhs.se/lunewp/abs/lunewp2015_021.htm
date added to LUP
2015-08-13 10:09:26
date last changed
2016-04-16 08:40:04
@misc{03f67131-9d85-4228-bd10-519d1e954eba,
  abstract     = {Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for pre-birth factors. We also examine the role played by bequests and find that, when they are taken into account, the role of adoptive parental wealth becomes much stronger. We find very little evidence that education or earnings of parents or children are important drivers of the intergenerational wealth relationship between children and their adoptive parents. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth.},
  author       = {Black, Sandra E. and Devereux, Paul J. and Lundborg, Petter and Majlesi, Kaveh},
  keyword      = {portfolio allocation,intergenerational mobility,nature versus nurture},
  language     = {eng},
  number       = {21},
  pages        = {41},
  publisher    = {ARRAY(0xbdb3298)},
  series       = {Working Paper / Department of Economics, School of Economics and Management, Lund University},
  title        = {Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth},
  year         = {2015},
}