It is often suggested that intergenerational bequests such as inheritances create and perpetuate wealth inequality. This column uses Danish data to explore the effects of bequests on the wealth distribution. While bequests are found to increase the dispersion of absolute wealth inequality, relative inequality declines. These findings suggest that inheritance alone need not increase wealth inequality.
Simon Boserup, Wojciech Kopczuk, Claus Kreiner, 11 March 2016
Ravi Kanbur, Joseph Stiglitz, 18 August 2015
Growth theories traditionally focus on the Kaldor-Kuznets stylised facts. Ravi Kanbur and Nobelist Joe Stiglitz argue that these no longer hold; new theory is needed. The new models need to drop competitive marginal productivity theories of factor returns in favour of rent-generating mechanism and wealth inequality by focusing on the ‘rules of the game.’ They also must model interactions among physical, financial, and human capital that influence the level and evolution of inequality. A third key component will be to capture mechanisms that transmit inequality from generation to generation.
Francesco Billari, Vincenzo Galasso, 07 November 2008
Economic theory views children as investment or consumption goods. Using Italian pension reforms as a natural experiment, this column find evidence that supports the “children as investment” view.
Vincenzo Galasso, Roberta Gatti, Paola Profeta, 12 May 2008
In traditional societies, old age support was guaranteed by intergenerational transfers within the family from young to old, but the weakening of family ties in modern societies has justified the introduction of social security systems, thus reducing the incentive to have children. The authors of CEPR DP6825 argue that pension generosity and development of capital markets are crucial to understand fertility decisions, as the role of children as a form of retirement saving for their parents is particularly strong in economies with limited or non-existent access to financial markets.