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Intergenerational wealth transmission in Great Britain

Author

Listed:
  • Ricky Kanabar

    (Univeristy of Bath)

  • Paul Gregg

    (Univeristy of Bath)

Abstract
The aim of this paper is to document the intergenerational persistence of wealth between adult offspring and their parent's using the Wealth and Assets Survey for Great Britain. As parental wealth it is not directly observed it is assessed as mean values based on age, home ownership and education from retrospective questions. Estimates are then derived employing a commonly used two stage estimator. For offspring aged around 44 and parents aged around 74, the oldest where wealth can reliably be observed in the sample, the intergenerational wealth elasticity (IWE) is 0.4 and the rank-rank elasticity 0.3. However, wealth is a stock accumulated over a person's working life and then dissaving takes place in retirement. Thus, peak wealth holding occurs around the age of 64 and this represents a proxy measure of life-time wealth accumulation. Under certain assumptions about parental wealth holding we explore wealth persistence for older offspring up to age 64. Importantly, we find at these older ages wealth persistence is generally lower than for those currently aged in their 30s and early 40s, though rank based estimates are broadly stable. The average IWE is 0.35 (ages 28-64) and rank equivalent 0.3 in 2012. For those in their 30s however, the IWE is 0.4, even though the short panel suggests a strong life cycle bias where wealth persistence is lower at ages below 64. Exploration of this contradiction shows that those who have a relatively high wealth among older cohorts came from more typical backgrounds than in younger ones. The six year panel data also shows that intergenerational wealth elasticity is 3.8 percentage points higher when comparing people with those the same age six years previously. There is, thus, very strong evidence of higher wealth intergenerational persistence in younger age cohorts. As it was already higher than for older cohorts and has risen rapidly, standing at 0.44 (ages 32-44) by 2018.

Suggested Citation

  • Ricky Kanabar & Paul Gregg, 2021. "Intergenerational wealth transmission in Great Britain," CEPEO Working Paper Series 21-06, UCL Centre for Education Policy and Equalising Opportunities, revised Apr 2021.
    • Handle: RePEc:ucl:cepeow:21-06
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    References listed on IDEAS

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    Cited by:

    1. Paul Gregg & Ricky Kanabar, 2022. "Parental homeownership and education: the implications for offspring wealth inequality in GB," CEPEO Working Paper Series 22-01, UCL Centre for Education Policy and Equalising Opportunities, revised Jul 2023.
    2. Buscha, Franz & Gorman, Emma & Sturgis, Patrick & Zhang, Min, 2023. "Ethnic differences in intergenerational housing mobility in England and Wales," GLO Discussion Paper Series 1222 [rev.], Global Labor Organization (GLO), revised 2023.
    3. Kanabar, Ricky & Gregg, Paul, 2022. "Intergenerational wealth transmission and mobility in Great Britain: what components of wealth matter?," ISER Working Paper Series 2022-02, Institute for Social and Economic Research.
    4. Jo Blanden & Andrew Eyles & Stephen Machin, 2023. "Intergenerational home ownership," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(2), pages 251-275, June.

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    More about this item

    Keywords

    Wealth; Inequality; intergenerational mobility; Great Britain.;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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