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Intergenerational wealth transfers - that is, gifts and inheritances - intensify inequality of opportunity in wealth accumulation and income generation. Such transfers can enable individuals to purchase or retain real estate, start or run a business, or invest in other assets (at possibly higher rates of return). At the same time, these transfers may reduce recipients' own efforts by diminishing their incentive to work - a phenomenon often referred to as the Carnegie effect. This project contributes to the relatively small body of literature that provides empirical evidence for this latter effect.
Earlier studies have restricted their attention to realized labor supply decisions following the receipt of wealth (inheritances, gifts, or lottery wins) or when gifts or inheritances are expected. Most of them support the finding that labor force participation and working hours tend to decline after a transfer is received or expected.
In this project, we analyze rich household survey data from different sources (the Dutch National Bank Household Survey and the HFCS). These datasets provide detailed individual-level information on received inheritances and gifts, including their monetary value, as well as wealth transfer expectations. In addition to labor market status and working hours they also include information regarding retirement expectations. These responses may be particularly informative, as labor supply changes may manifest primarily toward the end of one’s working life. Detailed micro-econometric analyses taking the specific characteristics of each dataset into account then allow us to test if intergenerational transfers alter recipients’ opportunity to work less and retire earlier.