DP11387 Inherited Wealth and Demographic Aging

Author(s): Harun Onder, Pierre Pestieau
Publication Date: July 2016
Keyword(s): aging, bequest motives, inherited wealth
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11387

The role of inherited wealth in modern economies has increasingly become under scrutiny. This study presents one of the first attempts to shed light on how demographic aging could shape this role. We show that, in the absence of retirement annuities, or for a given level of annuitization, both increasing longevity and decreasing fertility should reduce the inherited share of total wealth in a given economy. Thus, aging is not likely to explain a recent surge in this share in some advanced economies. Shrinking retirement annuities, however, could oset and potentially reverse these eects. We also show that aging could increase the size of individual bequests vis-à-vis real wages. However, these bequests will be more unequally distributed if aging is driven by a drop in fertility. In comparison, the eect of increasing longevity on their distribution in non-monotonic.