Subjective Inheritance Expectations and Economic Outcomes

Abstract

In this paper we investigate whether and to what extent inheritance expectations act as a driver of economic choices. We use the DHS dataset merged with a specific module on subjective probabilities on inheritance receiving and its amount foreseen in the next ten years. Hence, we analyze whether the expected inheritance acts as a deterrent to saving. Results suggest that individuals perceive the expected inheritances as a potential increase of personal wealth, which leads to a reduction in savings. Expectations appear to matter also in the enhancement of the intention to bequeath and in future work versus leisure choices.

Wealth Stratification and the Insurance Function of Wealth

“…Transfers and inheritances can affect individual behavior in various ways. Basiglio et al (2022) show with Dutch data that individuals perceive expected inheritances as a potential increase in their wealth, leading to a reduction in their savings. Moreover, expected inheritances affect intentions to bequeath and intended choices on work versus leisure in the future.…”

The intergenerational transmission of wealth

“…The estimated balance between inheritance and savings is method and data-dependent, and even if the newer estimates are more methodologically sophisticated, it is too early to conclude. Importanlty, if indviduals respond to expected transfers by changing their savings (Basiglio, Rossi and van Soest 2023), the distinction is also a bit blurred. The debate will continue.…”

“…As reported above, receiving inheritance tends to depress labor earnings among adults and increase consumption. This can work also via expected wealth transfers (Basiglio, Rossi and van Soest 2023).…”