Danish evidence on wealth inequality in childhood

Simon Boserup and Claus Kreiner from Department of Economics, UCPH, and Wojciech Kopczuk from Columbia University voice their knowledge on VOXEU. They explain:

"Economists normally study wealth formation and inequality among the adult population, but some people already possess economic resources in early childhood. This column uses data from Denmark to examine childhood wealth and the role of wealth transfers early in life. A main result is that wealth inequality starts as early as childhood. Although overall wealth levels in childhood are low, they are better predictors of wealth in adulthood than parental wealth.

After the publication of Capital in the Twenty-First Century by Thomas Piketty (2014), there has been renewed academic and public interest in the development of wealth inequality, wealth formation across generations, and the role of wealth transfers. In a previous paper, we used information from Danish wealth records to analyse the effects of wealth transfers at the time of parents’ death (i.e. bequests) on the wealth distribution of the next generation (Boserup et al. 2016a). This column describes the results of our recent research, where we zoom in on childhood wealth and the role of wealth transfers early in life (Boserup et al. 2016b).

Why is early childhood wealth of interest? Naturally, it is related to parental giving, and our prior assumption was that it is likely to reveal information that is relevant for understanding intergenerational mobility and wealth distribution later in life. More specifically, the questions we address are: Are childhood wealth and wealth inequality quantitatively important? What are the sources of childhood wealth? To what extent is the size of childhood wealth related to parental wealth? And does childhood wealth predict adulthood riches, and if so, why?" To get the answer read the full article.