Abstract
It is frequently assumed that the inheritance of wealth undermines economic activity. If such an assumption is valid, the expected wave of bequests may have a negative impact on labour market activity of heirs, what might further weaken the financing of state pension systems. This paper provides a detailed review of the empirical findings on the associations of inheritances with labour market activity, that is labour force participation status and working hours, and presents own analyses based on the survey of health, ageing, and retirement in Europe. We find that the receipt of an inheritance is not related to labour force participation in general. Inheritance expectations even have a small, but statistically significant positive effect on remaining in the labour force for men. Women who expect an inheritance tend to reduce working hours, but the effect of having received an inheritance is not significant, neither for men nor for women. We conclude that the receipt of an inheritance will not affect labour market decisions, so that the expected wave of bequests will not undermine active ageing policies.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Exact numbers are missing, but it is mentioned that “returns with total assets over one million dollars were sampled at a 100 percent rate” (Holtz-Eakin et al. 1993: p. 4).
As the SHARE questionnaire asks for inheritances received by the respondent or his or her wife or husband, we cannot take up this idea in our analyses: We cannot precisely identify the recipient in case of couples.
The sample was restricted to deceased who had a will, more than one child, and a positive estate.
In SHARE, we rely solely on the self-reported labour force status. It has to be noted that as a consequence of this definition, a part of this sample is still working for pay at T2, for example, in addition to receiving a state pension or being permanently sick or disabled, most frequently for a small number of hours per month.
Question wording: “Thinking about the next ten years, what are the chances that you will receive any inheritance, including property and other valuables?”
Question wording: “Since our interview in [year], have you [or your husband/wife/partner] received a gift or inherited money, goods, or property worth more than €5,000?”. Large transfers inter-vivos are much less frequent in the age group we are analysing and should have the same effect on labour market participation.
We will discuss our results using odds ratios, but—as there has been a long discussion on alternatives because of difficulties in comparing odds ratios between models (e.g. Mood 2010)—we additionally report Average Marginal Effects in the appendix (Tables 2a–5a). The online version contains supplementary material available at https://doi.org/10.1007/s10433-022-00706-1.
As suggested by one of the reviewers, we have additionally included the information on provision of care as a dummy variable into the model (results not presented here). However, the effect of caregiving at T2 on both outcomes is not significant, and the effects for our variables of interest—inheritance receipt and inheritance expectations—do not change when controlled for caregiving. We assume that this well reflects the situation among that part of the European population aged 50–54 which actively participates in the labour market. In our sample, less than 7% of women and less than 9% of men in paid employment have reported to provide care at T1. Hence, only a small proportion of the sample may have reduced working hours or quit working for that reason in T2, and the effects on expecting or receiving inheritances are negligible.
For example, a recent study from Germany reports a median value of 32,000 Euro (Baresel et al. 2021).
References
Amedah SA, Fougère M (2017) Impact of inheritance and housing wealth on retirement decision. Open J Soc Sci 5:1–12
Baresel K, Eulitz H, Fachinger U, Grabka M, Halbmeier C, Künemund H, Alcántara AL, Vogel C (2021) Erbschaften und Schenkungen–Hälfte aller Erbschaften und Schenkungen geht an die reichsten zehn Prozent aller Begünstigten. DIW Wochenbericht 5(2021):63–71
Blau DM, Goodstein RM (2016) Commitment in the household: evidence from the effect of inheritances on the labor supply of older married couples. Labour Econ 42:123–137
Börsch-Supan A, Brandt M, Hunkler C, Kneip T, Korbmacher J, Malter F, Schaan B, Stuck S, Zuber S (2013) Data resource profile: the survey of health, ageing and retirement in Europe (SHARE). Int J Epidemiol 42(4):992–1001
Brown JR, Coile CC, Weisbenner SJ (2010) The effect of inheritance receipt on retirement. Rev Econ Stat 92(2):425–434
Carnegie A (1891) The advantages of poverty. The gospel of wealth. The Century Co, New York, pp 47–82
Carr E, Hagger-Johnson G, Head J, Shelton N, Stafford M, Stansfeld S, Zaninotto P (2016) Working conditions as predictors of retirement intentions and exit from paid employment: a 10-year follow-up of the english longitudinal study of ageing. Eur J Ageing 13:39–48
Cox D (2014) Inheritance, bequests, and labor supply. IZA World Labor 2014:69
Cox D, Hansen BE, Jimenez E (1999) How responsive are private transfers to income? Evidence from a laissez-faire economy. J Public Econ 88(9–10):2193–2219
Dal Bianco C, Trevisan E, Weber G (2015) I want to break free. The role of working conditions on retirement expectations and decisions. Eur J Ageing 12:17–28
Doorley K, Nico NP (2020) Labour supply after inheritances and the role of expectations. Oxford Bull Econ Stat 82(4):843–863
Eder A (2016) The impact of inheritances on the retirement behavior of older Europeans. Empirica 43(2):299–331
Elinder M, Erixon O, Ohlsson H (2012) The impact of inheritances on heir’s labor and capital income. BE J Econ Anal Policy 12(1):1–35
Holtz-Eakin D, Joulfaian D, Rosen HS (1993) The Carnegie conjecture: some empirical evidence. Quart J Econ 108:413–435
Imbens GW, Rubin DB, Sacerdote B (2001) Estimating the effect of unearned income on labor earnings, savings, and consumption: evidence from a survey of lottery players. Am Econ Rev 91(4):778–794
Joulfaian D, Wilhelm MO (1994) Inheritance and labor supply. J Hum Res 29(4):1205–1234
Jürges H (2005) Gifts, inheritances, and bequest expectations. In: Axel B-S, Agar B, Jürges H, Mackenbach J, Siegrist J, Weber G (eds) Health, ageing and retirement in Europe. First results from the survey of health, ageing and retirement in Europe. Mannheim Research Institute for the Economics of Aging, Mannheim, pp 186–191
Lowenstein A, Katz R, Tur-Sinai A (2019) Intergenerational family relationships and successful aging. In: Fernandez-Ballesteros R, Benetos A, Robine J-M (eds) The Cambridge handbook of successful aging. Cambridge University Press, Cambridge, pp 455–474
Malo M, Sciulli D (2021) Wealth transfers and labour supply: impact of inheritances and gifts by gender in Europe. Int J Manpow. https://doi.org/10.1108/IJM-09-2020-0425)
Mood C (2010) Logistic regression: why we cannot do what we think we can do, and what we can do about it. Eur Sociol Rev 26(1):67–82
Niizeki T, Hori M (2018) The effect of inheritance receipt on individual labor supply: evidence from Japanese microdata. Jpn World Econ 49:176–186
OECD (2019) Current normal retirement age by gender Pensions Glance Paris (OECD) https://doi.org/10.1787/888934041326
OECD (2021) Inheritance taxation in OECD countries. OECD Tax Policy Studies. Paris (OECD)
Suari-Andreu E (2018) Behavioral responses of older Europeans to inheritance receipt. Behavioural responses of older Europeans to inheritance receipt
Szydlik M (2016) Sharing lives: adult children and parents. Routledge, New York
Tur-Sinai A, Lewin-Epstein N (2020) Transitions in giving and receiving intergenerational financial support in middle and old age. Soc Indic Res 150(3):765–791
Acknowledgements
This paper uses data from SHARE Waves 1, 2, 5 and 6 (DOIs: 10.6103/SHARE.w1.710, 10.6103/SHARE.w2.710, 10.6103/SHARE.w5.710, 10.6103/SHARE.w6.710), see Börsch-Supan et al. (2013) for methodological details. The SHARE data collection has been funded by the European Commission, DG RTD through FP5 (QLK6-CT-2001-00360), FP6 (SHARE-I3: RII-CT-2006-062193, COMPARE: CIT5-CT-2005-028857, SHARELIFE: CIT4-CT-2006-028812), FP7 (SHARE-PREP: GA N 211909, SHARE-LEAP: GA N°227822, SHARE M4: GA N°261982, DASISH: GA N°283646) and Horizon 2020 (SHARE-DEV3: GA N°676536, SHARE-COHESION: GA N°870628, SERISS: GA N°654221, SSHOC: GA N°823782) and by DG Employment, Social Affairs and Inclusion through VS 2015/0195, VS 2016/0135, VS 2018/0285, VS 2019/0332, and VS 2020/0313. Additional funding from the German Ministry of Education and Research, the Max Planck Society for the Advancement of Science, the U.S. National Institute on Aging (U01_AG09740-13S2, P01_AG005842, P01_AG08291, P30_AG12815, R21_AG025169, Y1-AG-4553-01, IAG_BSR06-11, OGHA_04-064, HHSN271201300071C, RAG052527A) and from various national funding sources is gratefully acknowledged (see www.share-project.org).
Funding
This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
None.
Ethical approval
Not applicable.
Additional information
Responsible Editor: Morten Wahrendorf.
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Supplementary Information
Below is the link to the electronic supplementary material.
Rights and permissions
About this article
Cite this article
Tur-Sinai, A., Künemund, H. & Vogel, C. Inheritances and work for pay — will the expected wave of bequests undermine active ageing policies?. Eur J Ageing 19, 1251–1261 (2022). https://doi.org/10.1007/s10433-022-00706-1
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10433-022-00706-1