NTA2020 McCarthy_b

Global Meeting on Population and the Generational Economy, August 2020

Presentation: David McCarthy, James Sefton, Inter-generational dark matter: the importance of inter-vivos capital transfers in determining the wealth distribution of the UK

Abstract

Inter-vivos capital transfers – largely from parents to children – are an under-researched area in economics. Using UK data, we show that the historical development of the age-wealth distribution in the UK cannot be replicated unless the level of inter-vivos capital transfers is of a similar order to observed bequest flows, much higher than the level reported in common surveys. Our results show that capital transfers including bequests are likely to be of the order of ~15% of GDP annually. We use this assumption to project the development of the wealth distribution in the UK and show that wealth, already largely held by older generations, is likely to become increasingly concentrated among the old. An implication of our work is that in order for the wealth distribution to be maintained at current levels, inter-vivos capital transfers will need to become much higher than they even already are.

File: NTA2020 McCarthy_b

Paper: NTA2020 paper McCarthy_b

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