The Output Cost of Inheritance

Marius Brülhart, Aurélien Eyquem, Isabel Martínez and Enrico Rubolino

No 25119, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: We study how inheritance affects labor supply over the life cycle, and we quantify its aggregate impact. Tracking earnings histories around some 135,000 inheritances and 5,000 lottery wins, we exploit the quasi-random timing and size of these events to identify labor supply responses with high precision. Earnings responses are negative at all ages but peak between ages 55 and 64, largely due to early retirement. Inheritances generate smaller impact responses than comparable lottery wins, consistent with anticipation effects. Our estimates match the predictions of a life-cycle model with endogenous labor supply and early retirement. Aggregating model-based responses across the population, our point estimate of the GDP cost of inheritance is 1.7%. The timing, size, and anticipation of inheritance all contribute to shaping its macroeconomic consequences.

Keywords: inheritance; labor supply; lottery wins; life-cycle effects (search for similar items in EconPapers)
JEL-codes: D31 D64 G51 H31 J22 (search for similar items in EconPapers)
Date: 2025-11
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Working Paper: The Output Cost of Inheritance (2025)
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