Intergenerational transfers: How do they shape the German wealth distribution?

Abstract

This paper uses SOEP data to study the distributional e ect of intergenerational trans- fers on the wealth distribution of German households. Similar to most other central Eu- ropean countries, Germany is likely to face a period of increasing aggregate bequest ows. At the same time, there is an ongoing debate on the distributional implications of such wealth shocks. This study adds to the discussion by providing causal estimates for the e ect of transfer receipt on the savings behavior of households. The model allows for dynamic adjustment and variations in the savings behavior over the wealth distribution. I use the estimates to decompose the overall e ect of transfers on wealth inequality in the e ect of the aggregated transfer volume, the transfer incidence over the wealth distribution and the e ect of the savings behavior. The results are very much in line with the literature, indicating that transfers tend to equalize wealth inequality, despite minor variations in the savings behav- ior over the wealth distribution and despite a strong relationship between initial household wealth and transfer accrual.