The Relative Impact of Inheritance and other Factors on Economic Inequality

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Abstract
An empirically grounded micro-simulation of saving, with bequests related negatively either in total to average children's income or separately to individual children's incomes, is constructed for a single generation in a steady growth economy. Behavioral parameters are set so that predicted bequests to the next generation are consistent with both the scale and assignment of inheritances (taken from a real-world source) for the simulation generation. The relative impact of inheritance and other factors on different aspects of economic inequality is assessed. While inheritance is a major cause of wealth inequality, its influence on annual income and lifetime resources is small, and in the latter case ambiguous.

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