Is There Wealth Stability Across Generations in the U.S.? Evidence from Panel Study, 1984-2013

Abstract

The wealth accumulation of parents appears to be strongly determinative of the wealth holdings of their adult children. However, previous research finds that parent-to-child estimates are likely to underestimate the full extent of social mobility and inequality in the US economy. This paper includes a focus on the grandparent generation in order to provide a more complete picture on economic transfers in the extended family, and place the current generation’s asset and wealth building process in a larger demographic context. Using longitudinal data, this paper finds that grandparents and parents have significant effects on asset (e.g. stocks, savings, homeownership) and net wealth building for the current generation. For the children of parents and grandparents at the top or bottom of the wealth distribution, there appears to be stability in wealth. These findings shed light on the connection between intergenerational networks, asset building, and intergroup disparities in wealth.

Keywords: stratification economics, intergenerational transfers, wealth inequality, elasticity, racial inequality

JEL Classification: Z13, D31, D64, J15