Arnold Kling

Bequests and Inequality

Arnold Kling, Great Questions of Economics
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Most of us would assume that if we could stop people from passing their fortunes along to their children, we could reduce inequality. Edward Wolff studied the issue.

The most surprising finding is that inheritances and other wealth transfers tend to be equalizing in terms of the distribution of household wealth. Indeed, the addition of wealth transfers to other sources of household wealth has had a sizeable effect on reducing the inequality of wealth. The results appear counter-intuitive. Richer households do receive greater inheritances and other wealth transfers than poorer households. However, as a proportion of their current wealth holdings, wealth transfers are actually greater for poorer households than richer ones.

Discussion Question. In an economy with rapid technological advance and economic growth, is it more important to inherit financial assets or a good education and the ability to adapt to change?

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