2020

Poor Little Rich Kids? The Role of Nature versus Nurture in Wealth and Other Economic Outcomes and Behaviors

Reprint No. 2020:51

Author(s): Sandra E. Black, Paul J. Devereux, Petter Lundborg and Kaveh MajlesiYear: 2020 Title: Review of Economic Studies Volume (No.): 87 (4) Pages: 1683–1725
Online article (restrictions may apply)


Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for pre-birth factors and we find little evidence that nature/nurture interactions are important. When bequests are taken into account, the role of adoptive parental wealth becomes much stronger. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth. We further build on the existing literature by providing a more comprehensive view of the role of nature and nurture on intergenerational mobility, looking at a wide range of different outcomes using a common sample and method. We find that environmental influences are relatively more important for wealth-related variables such as savings and investment decisions than for human capital. We conclude by studying consumption as an overall measure of welfare and find that, like wealth, it is more determined by environment than by biology.


Reference:
Black, Sandra E., Paul J. Devereux, Petter Lundborg and Kaveh Majlesi (2020), "Poor Little Rich Kids? The Role of Nature versus Nurture in Wealth and Other Economic Outcomes and Behaviors". Review of Economic Studies 87(4), 1683–1725.

Kaveh Majlesi

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kaveh.majlesi@nek.lu.se

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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