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The Impact of Inheritance on the Distribution of Wealth: Evidence from G reat B ritain
Author(s) -
Karagiannaki Eleni
Publication year - 2017
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12217
Subject(s) - inheritance (genetic algorithm) , economics , wealth distribution , inequality , distribution (mathematics) , demographic economics , distribution of wealth , wealth effect , national wealth , monetary economics , biology , mathematics , genetics , monetary policy , mathematical analysis , accounting , gene
Using the B ritish H ousehold P anel S urvey, we investigate the role of inheritance in shaping the distribution of household wealth in G reat B ritain during 1995–2005a period characterized by a substantial increase in wealth and an equally important decrease in wealth inequality. Abstracting from behavioral effects, we find that inheritances received during this period accounted for 30 percent of the increase in wealth of inheritors. Regression estimates of the effect of inheritance on wealth accumulation suggest that households spend 30 percent of their inheritances on average, and that there is substantial heterogeneity in household responses. Households that accumulated more wealth saved a larger share of their inheritances, as did middle aged households and those with lower initial wealth. Although inheritances are highly unequal they had a small impact on overall wealth inequality. This mainly reflected the fact that their size relative to other sources of wealth was very small.