Generations Of Advantage. Multigenerational Correlations in Family Wealth

Inequality in family wealth is high, yet
we know little about how much and how wealth inequality is maintained across
generations. We argue that a long-term perspective reflective of wealth’s cumulative
nature is crucial to understand the extent and channels of wealth reproduction
across generations. Using data from the Panel Study of Income Dynamics that
span nearly half a century, we show that a one decile increase in parental
wealth position is associated with an increase of about 4 percentiles in
offspring wealth position in adulthood. We show that grandparental wealth is a
unique predictor of grandchildren’s wealth, above and beyond the role of
parental wealth, suggesting that a focus on only parent-child dyads understates
the importance of family wealth lineages. Second, considering five channels of
wealth transmission — gifts and bequests, education, marriage, homeownership,
and business ownership — we find that most of the advantages arising from
family wealth begin much earlier in the life-course than the common focus on
bequests implies, even when we consider the wealth of grandparents. We also document
the stark disadvantage of African-American households in terms of not only their
wealth attainment but also their intergenerational downward wealth mobility compared
to whites.