Wealth of children from single-parent families: Low levels and high inequality in Germany

Abstract

Families’ economic wealth is a resource that can provide children with crucial advantages early in their lives. Prior research identified substantial variation of wealth levels between different family types with children from single-parent families being most disadvantaged. The causes of this disadvantage, how much the disadvantage varies between children and how the non-resident parents’ wealth may potentially reduce the disadvantage remain unclear. To address these research gaps, we use data from the German Socio-Economic Panel (2002–17) to examine the level of and inequality in wealth for children from single-parent families using recentred influence function regression and decomposition analysis. We replicate earlier findings of a large wealth disadvantage for children in single-parent families. We find that the wealth disadvantage can be mainly explained with compositional differences in household income and employment characteristics. Beyond level differences, inequality between children from single-parent families is higher than for other family types and this inequality can only partly be explained by observed demographic and socio-economic characteristics. When considering the wealth of non-resident parents, the wealth disadvantage of children in single-parent families is reduced but remains substantial. JEL-codes: D31, D1, J1

The Wealth (Disadvantage) of Single-Parent Households

“…Finally, an important priority for research to better inform policy is the further elucidation of the factors that give rise to the wealth deficits faced by many single-parent households. A particularly promising route will be to exploit longitudinal surveys that track the evolution of their income and wealth over time (building on, for example, Lersch et al [2021] for Germany and Bernardi, Boertien, and Geven [2019] for the United States). Doing so in a comparative perspective will be particularly revealing about the role of differing national contexts, in particular the importance of differences in institutions and policies.…”

“…Wealth can serve as a buffer against changes to household living standards that might be brought on by parental unemployment or health crises. Wealth can also fund investments in children’s education; act as a safety net for their educational and occupational choices; and be directly transferred from parents to children to assist them “get on the housing ladder,” start a business, or build their own wealth in other ways (Lersch et al 2021; Rodems and Pfeffer 2021). Parental wealth is positively related to various well-being outcomes, including health, and is also a key determinant of offspring’s cognitive skills and educational attainment (Pfeffer 2011).…”

“…Among the many challenges faced by single parents, the presence of a wealth deficit among them (compared with dual-parent households) would represent a major additional disadvantage, one that would carry serious implications for current living standards and economic security and for the well-being of their children and opportunities that are available to them. Some single-country studies have suggested that single parents do indeed face a wealth deficit compared to dual-parent households (e.g., Lersch et al 2021), as do the few studies that have adopted a comparative perspective (Sierminska, Smeeding, and Allegrezza 2013;Sierminska 2018). Here we probe the household wealth situation of single-parent households in six rich countries and highlight insights into the processes that might contribute to household wealth differentials.…”

“…Some single-country studies have suggested that single parents do indeed face a wealth deficit compared to dual-parent households (e.g., Lersch et al 2021), as do the few studies that have adopted a comparative perspective (Sierminska, Smeeding, and Allegrezza 2013; Sierminska 2018). Here we probe the household wealth situation of single-parent households in six rich countries and highlight insights into the processes that might contribute to household wealth differentials.…”

Effective Policies for Single-Parent Families and Prospects for Policy Reforms in the United States: Concluding Reflections

“…Much of this literature focuses on the role of transfers across families and generations, especially inheritance and inter vivos gifts. Several studies have considered gender gaps in wealth accumulation (Lersch, Jacob, and Karsten 2017; Lersch et al 2021; Gornick and Sierminska 2021)—a challenging endeavour given that wealth is often captured at the household level—but only a handful of cross-national studies (Sierminska 2018) have assessed disparities across family structure with a specific focus on single-parent families.…”