Intergenerational Correlations in Wealth. Pfeffer, F. T. & Killewald, A. In Federal Reserve Bank of St. Louis, the, & Board of Governors of the Federal Reserve System, editors, Economic Mobility: Research and Ideas on Strengthening Families, Communities, and the Economy., pages 176–201. Federal Reserve System, Washington, D.C., 2016.
Intergenerational Correlations in Wealth [link]Link  abstract   bibtex   
Our analyses substantially improve and expand the few prior estimates of intergenerational correlations in wealth. Existing evidence on intergenerational rigidity in the U.S. wealth distribution comes from a small number of studies, which, like ours, use data from the Panel Study of Income Dynamics (PSID) but, unlike ours, were only able to examine the wealth outcomes of younger adults (Charles and Hurst 2003; Conley and Glauber 2008; Mulligan 1997). This limitation was imposed by data restrictions at the time of analysis and already acknowledged in that research, suggesting that it would be more appropriate to measure wealth at later ages when adults have had more time to accumulate assets (Charles and Hurst 2003, fn.5; Conley and Glauber 2008, p. 10). We hypothesize that adults' wealth will more closely resemble that of their parents as both generations enter middle and late adulthood, aging out of the period of intensive investments in young adulthood and increasingly accumulating assets. Drawing on newly available data from the PSID, we update estimates of intergenerational wealth correlations and test whether intergenerational wealth transmission indeed strengthens from early through late adulthood. Additionally, we examine the contours of the intergenerational reproduction of wealth. We hypothesize that wealth positions at the top and bottom of the distribution may be particularly sticky, with very wealthy parents able to secure a substantial wealth advantage for their children, and parents without assets especially likely to have adult children who also fail to accumulate any wealth. When the intergenerational transmission of wealth is measured with a single parameter, such as an intergenerational elasticity, this variability is lost. Evaluating the persistence of the highest levels of wealth across generations also speaks to concerns about a wealthy elite that wields dynastic financial power. Together, our analyses offer a rich description of the intergenerational persistence of wealth across generations, how these patterns differ across the wealth distribution, and to what extent education and inheritance can account for these intergenerational associations. Our analyses mitigate the great imbalance of a large literature focused on the description of intergenerational correlations in other dimensions of socioeconomic standing, mostly occupational classes or income.
@incollection{PfefferKillewald2016,
  title = {Intergenerational Correlations in Wealth},
  booktitle = {Economic Mobility: Research and Ideas on Strengthening Families, Communities, and the Economy.},
  author = {Pfeffer, Fabian T. and Killewald, Alexandra},
  editor = {{Federal Reserve Bank of St. Louis and the} and {Board of Governors of the Federal Reserve System}},
  year = {2016},
  pages = {176--201},
  publisher = {{Federal Reserve System}},
  address = {{Washington, D.C.}},
  url = {https://www.stlouisfed.org/community-development/publications/economic-mobility},
  abstract = {Our analyses substantially improve and expand the few prior estimates of intergenerational correlations in wealth. Existing evidence on intergenerational rigidity in the U.S. wealth distribution comes from a small number of studies, which, like ours, use data from the Panel Study of Income Dynamics (PSID) but, unlike ours, were only able to examine the wealth outcomes of younger adults (Charles and Hurst 2003; Conley and Glauber 2008; Mulligan 1997). This limitation was imposed by data restrictions at the time of analysis and already acknowledged in that research, suggesting that it would be more appropriate to measure wealth at later ages when adults have had more time to accumulate assets (Charles and Hurst 2003, fn.5; Conley and Glauber 2008, p. 10). We hypothesize that adults' wealth will more closely resemble that of their parents as both generations enter middle and late adulthood, aging out of the period of intensive investments in young adulthood and increasingly accumulating assets. Drawing on newly available data from the PSID, we update estimates of intergenerational wealth correlations and test whether intergenerational wealth transmission indeed strengthens from early through late adulthood. Additionally, we examine the contours of the intergenerational reproduction of wealth. We hypothesize that wealth positions at the top and bottom of the distribution may be particularly sticky, with very wealthy parents able to secure a substantial wealth advantage for their children, and parents without assets especially likely to have adult children who also fail to accumulate any wealth. When the intergenerational transmission of wealth is measured with a single parameter, such as an intergenerational elasticity, this variability is lost. Evaluating the persistence of the highest levels of wealth across generations also speaks to concerns about a wealthy elite that wields dynastic financial power. Together, our analyses offer a rich description of the intergenerational persistence of wealth across generations, how these patterns differ across the wealth distribution, and to what extent education and inheritance can account for these intergenerational associations. Our analyses mitigate the great imbalance of a large literature focused on the description of intergenerational correlations in other dimensions of socioeconomic standing, mostly occupational classes or income.},
  keywords = {Determinants of Wealth and Wealth Inequality,Intergenerational Wealth}
}
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