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

40 Pages Posted: 4 Sep 2015

See all articles by Sandra E. Black

Sandra E. Black

Columbia University; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics; Norwegian School of Economics (NHH) - Department of Economics

Paul J. Devereux

University College Dublin - Department of Economics; IZA Institute of Labor Economics

Petter Lundborg

Tinbergen Institute; Lund University School of Economics and Management; IZA Institute of Labor Economics

Kaveh Majlesi

Lund University; Research Institute of Industrial Economics (IFN); IZA Institute of Labor Economics

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 genetics. 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. 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.

Keywords: intergenerational mobility, nature versus nurture, portfolio allocation

JEL Classification: G11, J01, J13, J62

Suggested Citation

Black, Sandra E. and Devereux, Paul J. and Lundborg, Petter and Lundborg, Petter and Majlesi, Kaveh, Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth. IZA Discussion Paper No. 9227, Available at SSRN: https://ssrn.com/abstract=2655248 or http://dx.doi.org/10.2139/ssrn.2655248

Sandra E. Black (Contact Author)

Columbia University ( email )

420 W. 118th Street
NY, NY 10027
United States
5125745788 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Paul J. Devereux

University College Dublin - Department of Economics ( email )

Belfield
Dublin 4, 4
Ireland

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Petter Lundborg

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Lund University School of Economics and Management ( email )

P.O Box 7080
Lund
Sweden

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Kaveh Majlesi

Lund University ( email )

Box 117
Lund, SC Skane S221 00
Sweden

Research Institute of Industrial Economics (IFN) ( email )

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

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
77
Abstract Views
736
rank
424,542
PlumX Metrics