Inherited advantage: The importance of inheritance for private wealth accumulation in Europe

This study examines from a cross-national perspective the importance of inheritance as a source of private wealth accumulation. Multivariate econometric analyses of harmonized survey data obtained from 11 European countries reveal that inheriting households own considerably more wealth than non-inheriting households, all other things equal. The wealth gap between households who received lifetime gifts or bequests and those who did not varies hugely along the distribution of net wealth. At the median, the wealth gap reaches about 112,000 euros and increases beyond 517,000 euros at the 90th percentile. With regard to the very top percentiles, survey data even suggests differences in wealth levels greater than 1 million euros. Furthermore, the study finds evidence that wealth transfers contribute more to wealth accumulation than higher incomes do. Depending on the respective social position of a household, a gain of one percentile in income distribution entails an increase of between 0.1 and 0.6 percentiles in net wealth, whereas wealth transfers can raise the net wealth of the receiving households by as much as 27 percentiles. These findings suggest a decisive role of intergenerational transfers for the financial well-being of households. Kinship is (again) key to wealth accumulation in Europe.