Carnegie Visits Nobel: Do Inheritances Affect Labor and Capital Income?

35 Pages Posted: 6 May 2012

See all articles by Mikael Elinder

Mikael Elinder

Uppsala University - Department of Economics; Research Institute of Industrial Economics (IFN)

Oscar Erixson

Research Institute of Industrial Economics; Uppsala University - Department of Economics

Henry Ohlsson

Uppsala University - Department of Economics

Date Written: March 3, 2011

Abstract

The objective of this paper is to study when and how much labor supply and savings of heirs respond to inheritances. We estimate fixed effects models following direct heirs, inheriting in 2004, during the years 2000-2008 using Swedish panel data. Our first main result is that the more the heir inherits, the lower her labor income becomes. This labor supply effect appears in the years after the heir had inherited. We also find evidence of anticipation effects that occur before the actual transfer. Our second main result is that the more the heir inherits, the higher her capital income becomes. This savings effect only appears in the years after receiving the inheritance. It disappears after a couple of years.

Keywords: Inheritances, Bequests, Windfall gains, Labor supply, Capital income, Uncertainty

JEL Classification: D10, D80, D91, J22

Suggested Citation

Elinder, Mikael and Erixson, Oscar and Ohlsson, Henry, Carnegie Visits Nobel: Do Inheritances Affect Labor and Capital Income? (March 3, 2011). IFN Working Paper No. 866, Available at SSRN: https://ssrn.com/abstract=2050942 or http://dx.doi.org/10.2139/ssrn.2050942

Mikael Elinder (Contact Author)

Uppsala University - Department of Economics ( email )

Box 513
Uppsala, 751 20
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Oscar Erixson

Research Institute of Industrial Economics ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
+46(0)704676110 (Phone)

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden

Henry Ohlsson

Uppsala University - Department of Economics ( email )

Box 513
Uppsala, SE-75120
Sweden
+46 18 471 51 04 (Phone)

HOME PAGE: http://www.uueconomics.se/henryo/

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