We thank our discussant at the AEA 2016 meeting Kathleen McGarry as well as numerous seminar and workshop participants for comments and discussion. Financial support from the Economic Policy Research Network (EPRN) and the Danish Council for Independent Research (DFF-1329-00046) is gratefully acknowledged. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Using Danish administrative data, we estimate the impact of bequests on the level and inequality of wealth. We compare the distributions of wealth over time of people whose parent died and those whose parent did not. Bequests account for 26 percent of the average post-bequest wealth 1-3 years after parental death and significantly affect wealth throughout the distribution. Bequests increase absolute wealth inequality (variance of the distribution censored at the top/bottom 1% increases by 33 percent), but reduce relative inequality (the top 1% share declines by 6 percentage points from the base of 31 percent).

We use Danish wealth records from three decades to characterise wealth inequality in childhood, where the main source of wealth is transfers. Wealth holdings are small in childhood but they have strong predictive power for future wealth in adulthood. At age 18, asset holdings of children are more informative than parental wealth in predicting wealth of children when they are in their 40s. We investigate why and rule out that childhood wealth in itself can accumulate enough to explain later wealth inequality. Instead, childhood wealth seems to proxy for intergenerational correlation in savings behaviour and additional transfers from parents. 2 Charles and Hurst (2003) provide estimates of intergenerational wealth mobility for the US using the PSID survey data. They review a few older studies of intergenerational wealth mobility. Recent studies on intergenerational wealth mobility include Black et al. (2015) and Fagereng et al. (2015) who use data for adoptees to study the role of nature versus nature in explaining the intergenerational correlation in wealth. Clark and Cummins (2014) and Adermon et al. (2015) contribute to the growing literature on multigenerational mobility (Solon, 2015) by estimating wealth mobility across multiple generations for the UK and Sweden, respectively.12 The non-linearity at the bottom of the parental distribution probably reflects that the wealth levels of these parents are a bad proxy for their 'true' types. Large negative wealth may reflect involvement in risky investment projects that either have gone wrong or have not paid off yet. Consistent with this hypothesis, we find that self-employed are largely overrepresented in the bottom of the distribution. Additional Supporting Information may be found in the online version of this article: Data S1.

We study wealth inequality in childhood using Danish wealth records from three decades. While teenagers have some earnings, we estimate that transfers account for at least 50 percent of wealth at age 18, and much more so for the rich children. Inheritance from grandparents does not appear quantitatively important, but we do find evidence that children receive inter vivos transfers. While wealth holdings are small in childhood, they have strong predictive power for future wealth in adulthood. Asset holdings at age 18 are more informative than parental wealth in predicting wealth of children many years later when they are in their 40s. Hence, childhood wealth reveals significant heterogeneity in the intergenerational transmission of wealth, which is not simply captured by parental wealth alone. We investigate why this is the case and rule out that childhood wealth in itself can accumulate enough to explain later wealth inequality. Our evidence indicates that childhood wealth is a proxy for a broad set of circumstances related to intergenerational transmission and future wealth accumulation, including savings/investment behavior and additional transfers.

No abstract