How Rigid is the Wealth Structure and Why? Inter- and Multigenerational Associations in Family Wealth
PDF Pfeffer, Fabian T., and Alexandra Achen Killewald. 2015. "How Rigid is the Wealth Structure and Why? Inter- and Multigenerational Associations in Family Wealth." PSC Research Report No. 15-845. 9 2015.
Inequality in family wealth is high and rising. Yet we know little about how much and how wealth inequality is maintained across generations, in particular compared to the vast literatures on intergenerational rigidity in the income or class structure. Using data from the Panel Study of Income Dynamics that span nearly half a century, we provide reliable estimates of two- and three-generational associations in family wealth, assess black-white differences in the transmission of wealth, and uncover the relative importance of different channels through which wealth inequality is reproduced across generations. Our results indicate a considerable degree of intergenerational wealth transmission across not only two but three generations, particularly high rigidity at the top of the wealth distribution, and a stark disadvantage of African-American households through their disproportional and repeated relegation to the bottom of the wealth distribution. We also show that wealth transmission occurs early in life, namely through the provision of educational advantage, while bequests and inter-vivos transfers – the focus of most prior research – play a smaller role. The intergenerational rigidity of wealth that we reveal here raises concerns about the distribution of opportunity among future generations, especially in the context of continued stratification of the wealth distribution.