Inheritance and Wealth Inequality: Evidence from Population Registers

51 Pages Posted: 4 Apr 2016

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

Daniel Waldenström

Research Institute of Industrial Economics

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Abstract

We use new population-wide register data on inheritances and wealth in Sweden to estimate the causal impact of inheritances on wealth inequality. We find that inheritances reduce relative wealth inequality (e.g., the Gini coefficient falls by 5–10 percent) but that absolute dispersion increases. Examining different parts of the wealth distribution, we find that the top decile's wealth share decreases substantially, whereas the wealth share of the bottom half increases from a negative to a positive share. In essence, wealthier heirs inherit larger amounts, but less wealthy heirs inherit more relative to their pre-inheritance wealth. We also find that post-inheritance behavioral adjustments mitigate the equalizing effect of inheritances because less wealthy heirs consume larger shares of their inheritances. Moreover, we find that the Swedish inheritance tax reduced the equalizing inheritance effect but that the redistribution of tax revenues could reverse this result. Finally, we show that inheritances increase wealth mobility.

Keywords: bequests, estates, net worth, inheritance taxation, wealth distribution

JEL Classification: H24, D63, E21

Suggested Citation

Elinder, Mikael and Erixson, Oscar and Waldenstrom, Daniel, Inheritance and Wealth Inequality: Evidence from Population Registers. IZA Discussion Paper No. 9839. Available at SSRN: https://ssrn.com/abstract=2757949

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

Daniel Waldenstrom

Research Institute of Industrial Economics ( email )

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

HOME PAGE: http://www.ifn.se/danielw

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