Inherited Advantage: Comparing Households that Receive Gifts and Bequests with Non-receiving Households across the Distribution of Household Wealth in 11 European Countries

Abstract

This study examines the importance of gifts and bequests ('wealth transfers') across the distribution of household wealth. Unconditional quantile regression applied to harmonized survey data obtained from 11 European countries reveals that households that receive gifts and bequests own considerably more wealth than non-receiving households, all other things being equal. The wealth gap varies hugely along the distribution of net wealth. At the median, the wealth gap reaches about 119,000 euros and increases to 630,000 euros at the 90th percentile. With regard to the 99th percentile, survey data even indicate differences in wealth levels greater than 2.3 million euros. Further analysis finds evidence that the impact of wealth transfers on household wealth follows an inverted U-shaped pattern: gifts and bequests contribute the most to the stock of private wealth in the broad mid-section and less so at the lower and upper ends of the distribution. Overall, the study provides evidence for a strong nexus between inheritance and household wealth that is not limited to the top.

The Gender (Tax) Gap in Parental Transfers. Evidence from Administrative Inheritance and Gift Tax Data

“…At the same time, receiving an inheritance raises a household's wealth position by about 14 percentiles of the national net wealth distribution. Therefore, the easiest way to richness is simple: become an heir (Korom, 2018;Semyonov and Lewin-Epstein, 2013).…”

Wealth in Couples: Introduction to the Special Issue

“…Intergenerational wealth transfers are a significant source of wealth and extend the accumulation of wealth beyond individuals’ life courses (Gale & Scholz, 1994 ). The relative importance of transfers compared to savings from surplus income for wealth accumulation is empirically controversial, but recent studies show that inherited wealth likely represents around 50–60% of total wealth (Alvaredo et al, 2017 ) and that those in the middle of the wealth distribution are likely to benefit more from transfers in terms of improvements in their wealth position than those further down or up in the distribution (Korom, 2018 ). Moreover, the relative importance of transfers and income depends on the life-course phase, since large capital transfers from parents often only occur in the second half of the adult child’s life (Pfeffer & Killewald, 2018 ).…”

Intergenerational wealth transmission and homeownership in Europe–a comparative perspective

“…There is growing interest in the role of parental financial aid on the wealth prospects of their offspring, particularly in relation to achievement of homeownership, since housing assets constitute the single largest share of net worth for households, which tend to increase in value over time [ 1 , 2 ]. This is the case across most advanced economies, especially following their recovery from the Global Financial Crisis [ 3 ].…”

“…The main independent variable in the analysis is IWT , which we consider a dummy variable distinguishing between households receiving wealth transfers and non-receiving households. We combined this variable with the following two questions [ 2 ]: First, did the household receive an inheritance or substantial gift (including money or any other financial asset). Second, did the household inherit its main residences or receive it as a gift.…”