DP11059 The Role of Bequests in Shaping Wealth Inequality: Evidence from Danish Wealth Records

Author(s): Simon H. Boserup, Wojciech Kopczuk, Claus T. Kreiner
Publication Date: January 2016
Keyword(s): bequests, intergenerational mobility, wealth, wealth inequality
JEL(s): D31, E21, J62
Programme Areas: Labour Economics, Public Economics, Macroeconomics and Growth
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11059

Using Danish administrative data, we estimate the impact of bequests on the level and inequality of wealth. We employ an event study design where we follow the distribution of wealth over time of people who are 45-50 years old, and divided into treatment group and control group depending on whether a parent dies or 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. We find that bequests increase measures of absolute wealth inequality (variance), but reduce relative inequality (top wealth shares). Following the receipts of bequests, variance of the distribution censored at the top/bottom 1% increases by 33 percent, but the top 1% share declines by 6 percentage points from an initial level of 31 percent and the top 10% share declines by 10 percentage points from a base of around 81 percent.