Dynamics of Intergenerational Transfers and Wealth Accumulation

This study examines how intergenerational wealth transfers impact children’s wealth accumulation and theirintention to bequeath, focusing on the role of different types of transferable assets (housing and financial assets). The results indicate that households decrease their saving rate when they expect to receive housing assetsfrom their parents. By contrast, they increase saving rate when they expect to receive financial assets. This contrasting pattern is particularly salient among households with low asset holdings. For households with high asset holdings, the relationship between saving and wealth transfer expectations is observed for housing but not for financial assets. We also find that when children expect wealth transfer from their parents, they are more likely to bequeath the same type of assets that they expect to receive. In particular, when a child’s household desires to leave more assets to their descendants than they expect to receive from their parents, the expectation of financial asset transfers leads to an increased saving rate in the child’s household. We also discuss policy implications for wealth disparities across generations based on our empirical results. JEL classification codes: D14, D15, D64