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Redistributing wealth within the Family: Evidence from an Inheritance Reform


Emma von Essen
SOFI & Aarhus

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We analyze a Swedish reform that shifted the right to inherit an estate from children to their surviving parent. In a dynastic model with Ricardian equivalence, a transfer of wealth within the family due to exogenous government policy has no impact on the consumption of parents and children. We test and reject this prediction with hand-collected data on estates merged with panel data on labor supply and durable consumption. Our results suggests that parents reacted to the inheritance reform as if all wealth previously inherited by children expanded their budget constraint. We find no impact of the reform on children.

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