Volume 29, Number 4 (Fall) 1994
Joulfaian, David, and Mark O. Wilhelm. 1994. "Inheritance and Labor Supply." Journal of Human Resources 29(4):1205-1234.
Using data from the Michigan Panel Study of Income Dynamics and from Federal Estate Tax returns, this paper investigates the labor disincentive caused by inheritance. The results are of interest for several reasons. Whether or not inheritances are a strong labor disincentive figures prominently in the controversy surrounding the relative importance of inheritances and life-cycle savings as sources of U.S. wealth. Also, the size of the disincentive is important in determining the relationship between inheritance and inequality. Our results indicate that inheritances do not lead to large reductions in the labor supply of men and married women. Family consumption increases after an inheritance, but again the effect is small.
David Joulfaian is with the Office of Tax Analysis, U.S. Treasury, and Mark O. Wilhelm is a professor of economics at Pennsylvania State University. The authors express gratitude, without implication, to Myoung-jae Lee, David Ribar, Mark Rider, and Emmanuel Skoufias for helpful discussions. Beneficial comments were also provided by Patricia Anderson, Arleen Liebowitz, Leslie Whittington, the participants at the RAND Conference on Economics and Demographic Aspects of Intergenerational relations and several other seminars, and two anonymous referees. Penn State's Population Research Institute provided computing resources. The views discussed in this paper are those of the authors, and do not necessarily reflect those of either institution with which the authors are affiliated. The PSID data used in this article can be obtained beginning June 1995 through June 1998 from Mark O. Wilhelm, Department of Economics, 608 Kern Building, The Pennsylvania State University, University Park, PA 16802.
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