We decompose the channels through which parents and children have correlated net worth using a novel administrative data set from Sweden that follows a panel of parents matched to their grown children. We find that children’s initial endowments of net worth and their subsequent net worth accumulations are positively correlated with parents’ net worth. There are two main channels of intergenerational wealth correlation. Children of wealthy parents have higher earnings, even conditional on intergenerational correlation in earnings, most of which they consume. The intergenerational correlation in net worth comes largely from housing wealth. We argue that arises from correlated home ownership among high net worth parents and their children, the propensity of home owners to save, and from children of high net worth parents spending more on housing at the time of first purchase. We also consider the impact of bequests, intervivos transfers, portfolio choice, and savings propensities.
How Parents Influence the Wealth Accumulation of Their Children with Peter Englund and Thomas Jansson, Mimeo, July 17, 2013.