Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth

Sandra E. Black, Paul J. Devereux, Petter Lundborg, Kaveh Majlesi

NBER Working Paper No. 21409
Issued in July 2015, Revised in July 2017
NBER Program(s):Children, Labor Studies

Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for pre-birth factors. When bequests are taken into account, the role of adoptive parental wealth becomes much stronger. We find no evidence that education or earnings of parents are important drivers of the intergenerational wealth relationship between children and their adoptive parents and a limited role for child earnings, education, savings rates, and asset allocation in mediating the relationship. Indeed, savings rates are lower for children of wealthier parents. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth. We also study consumption as an alternative measure of welfare and find both biological and environmental effects. However, the intergenerational consumption relationships largely disappear once we control for education, earnings, and wealth of parents and children.

download in pdf format
   (1661 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21409

Users who downloaded this paper also downloaded* these:
Scheuer and Werning w21323 The Taxation of Superstars
Black, Devereux, Lundborg, and Majlesi w21332 On the Origins of Risk-Taking
Ravallion w21394 Inequality when Effort Matters
Black and Devereux w15889 Recent Developments in Intergenerational Mobility
Lim and Meer w21407 The Impact of Teacher-Student Gender Matches: Random Assignment Evidence from South Korea
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us