Inheritances, Family Background and Wealth Inequality

This paper estimates the importance of inheritances, family background and their interaction in the process of wealth transmission across generations, and the contribution of these factors to wealth inequality in four OECD countries: France, Spain, United Kingdom and the United States. Using a non-parametric inequality of opportunity approach, we find a sizable contribution of inheritances to wealth inequality, above all when interactions with socioeconomic background are considered. These findings are robust to the four economies analysed, in spite of important differences in their taxation of wealth and inheritances systems. The combined contribution of inheritances and parental background is close to half of wealth inequality in three of the four countries analysed and is in any case greater than one fourth of it. Moreover, the importance of inheritances in all countries (between 22.02% and 42.27%) roughly doubles that of socioeconomic background (between 8.80% and 22.76%). In the current context of a general increase in wealth inequality, this result calls for a rethinking of the fiscal treatment of wealth and inheritances.