The Inherited Inequality: How Demographic Aging and Pension Reforms can Change the Intergenerational Transmission of Wealth

Abstract

Abstract The role of inherited wealth in modern economies has increasingly come under scrutiny. This study presents one of the first attempts to shed light on how demographic aging could shape this role. It shows that, in the absence of retirement annuities, or for a given level of annuitization, both increasing longevity and decreasing fertility should reduce the inherited share of total wealth in a given economy. Thus, aging is not likely to explain a recent surge in this share in some advanced economies. Shrinking retirement annuities, however, could offset and potentially reverse these effects. The paper also shows that individual bequests will be more unequally distributed if aging is driven by a drop in fertility. In comparison, the effect of increasing longevity on their distribution is non-monotonic.