Scandinavian Working Papers in Economics
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Department of Economics, Uppsala University Working Paper Series, Uppsala Center for Fiscal Studies, Department of Economics, Uppsala University

No 2010:3:
The Effect of Inheritance Receipt on Labor and Capital Income: Evidence from Swedish Panel Data

Mikael Elinder (), Oscar Erixson () and Henry Ohlsson ()

Abstract: In this paper we study the effects of inheritances on labor and capital income of heirs. We use unique register based Swedish panel data to estimate both short run and medium run responses. The few existing studies have mainly focused on short run responses, using data from the U.S. Models of life cycle consumption stress that anticipated and unanticipated income changes have different impacts on the optimal consumption path. In Sweden, as in other countries with extensive public insurances and succession rules that prohibit decedents from bequeathing the entire estate to others than their children, inheritances are likely to be anticipated to a higher degree than in the U.S. Our estimates suggest that there is a negative effect of inheriting on labor income in the year of the receipt and the year after, and that the negative effect is even larger two to three years after receiving the inheritance. Moreover, we find that capital income increases by an amount corresponding to wealth increasing at least by the amount inherited.

Keywords: inheritances; bequests; windfall gains; labor supply; capital income; uncertainty; (follow links to similar papers)

JEL-Codes: D10; D80; D91; J22; (follow links to similar papers)

28 pages, April 27, 2010

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This paper is published as:
Elinder, Mikael, Oscar Erixson and Henry Ohlsson, (2012), 'The Effect of Inheritance Receipt on Labor and Capital Income: Evidence from Swedish Panel Data', The impact of inheritances on heirs’ labor and capital income' in B.E. Journal of Economic Analysis & Policy, Vol. 12 (1), No. 61

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