Study results show that inheritances do not contribute to wealth inequality

INHERITANCES play an important role in helping descendants buy homes, but valuables passed on to sons and daughters do not contribute significantly to wealth inequality, a study has found.

An economic paper written by central bank economists shows that by 2020 more than a third of households in Ireland had inherited wealth.

The cumulative value was a staggering €97 billion.

These inheritances account for around one-sixth of the net worth of these households.

The Economic Letter, written by Simone Arrigoni, Laura Boyd and Tara McIndoe-Calder, found that those who received property or cash as gifts tended to be much wealthier and own more property.

Inherited wealth accounts for a larger share of total net wealth in middle-income households than in the wealthiest households.

“Consequently, our analysis shows that in Ireland inheritance contributes little to wealth inequality and may even have reduced it over time, similar to the findings for the UK and the United States,” the paper reads.

The paper seems to suggest that inheritance does not make families richer, but rather maintains similar levels of wealth accumulation.

According to the study, The long and the short of it: Inheritance and Wealth in Ireland, the incidence of inheritance appears to be increasing over time.

It has been found that a higher proportion of households have received inheritances in the last 20 years than before.

Households with a head of household aged 60 or older tended to inherit more often in 2020 than comparable households in 2013.

And wealthier households were more likely to receive inheritances.

The paper, which uses data from the Central Statistics Office, notes that money was the most common type of asset received by households who reported ever receiving an inheritance.

According to a 2020 CSO survey, about a third of those who have left have found a home, with land accounting for one in five inheritances.

But land was the great asset. It represented around 70 percent of the value of all inheritances received by households by 2020.

Apartments and land represented the greatest value in the overall heritage until the 1980s.

But thereafter, money became an integral part of the value of transfer assets, reflecting changes in the Irish economy, central bank economists explain.

As of 2020, the vast majority of inheritances and gifts go to parents.

According to the academic paper, the value of inherited wealth in Ireland has increased over time, with a larger proportion of households in 2020 having inherited wealth over the last 20 years than at any time before.

And households that have received inheritances or gifts are significantly wealthier and own more homes and businesses than households that have not inherited wealth.

“Despite these stylized facts, we find that inheritance and gifts contribute little to the overall distribution of wealth in Ireland,” reads the newspaper.

The study states that “inheritance may actually have reduced overall wealth inequality over time, as its contribution to net wealth is higher for households in the middle of the wealth distribution than for households at the top.” Study results show that inheritances do not contribute to wealth inequality

Fry Electronics Team

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