Intergenerational transfers and the accumulation of wealth

This paper provides evidence on the role of intergenerational transfers as a source of wealth. We use household data on transfers to provide direct estimates of transfer wealth, as we distinguish between intended transfers (for example, gifts to other households) and possible unintended transfers (bequests). We estimate that intended transfers account for at least 20 percent of net worth, and possibly significantly more. Thus a significant portion of U.S. wealth accumulation cannot be explained by the life-cycle model (according to which wealth is accumulated and consumed within a lifetime), even when the model is augmented to allow for bequests. We also show, contrary to many studies of transfers that focus only on bequests, that transfers between living persons are an important component of aggregate transfers.