Intergenerational Transfers and the Concentration of Wealth within Family Lineages

We study the role of intergenerational money transfers for the reproduction of wealth using sibling and cousin data from the Panel Study of Income Dynamics and its 2013 Rosters and Transfers module. We assess the pattern of within-family variation in intergenerational transfers – i.e. whether all, some, or no children receive transfers – and the contribution of this variation to the concentration of wealth within family lineages, not just one but potentially two generations down. Do parental transfers have equalizing or stratifying influence on the sibling’s wealth attainment? Furthermore, are these equalizing/stratifying effects are still observable in a third generation? If so, differential intergenerational transfers may serve to pass on advantage across multiple generations and thereby contribute to long-term rigidities in the wealth structure.

Initial analyses reveal that the concentration of wealth within family lineages is high: 42 percent of current family wealth can be traced to the common origins of siblings who have reached later adulthood (ages 45-64) and a fifth of attained wealth can even be traced to the common origins of cousins (i.e. grandparental environments), reflecting concentration of family wealth within family lineages beyond just two generations. Parental transfers play a significant role in this process: Their occurrence explains a fifth of the sibling correlation in wealth and 15% of the cousin correlation. We have begun an investigation of the pattern of differential transfer patterns within families and find that among families who have multiple children and who send monetary transfers to the next generation, only 22% of families transfer to all their children while the remaining 78% of families transfer to just some of them. For this session, we will more describe in more detail how these differential transfer patterns relate to the wealth outcomes of offspring one and two generations down.