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Expected wealth transfers and consumption across the wealth distribution in Europe

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  • Malo, Miguel Á.
  • Sciulli, Dario

Abstract

This article presents an empirical analysis of the relationship between expected wealth transfers (inheritances and gifts) and consumption, explicitly considering the distribution of consumption and wealth. While there are many empirical analyses of unexpected wealth transfers, it is unusual to analyze consumption with respect to expected wealth transfers because of the lack of information on expected inheritances or gifts. Using microdata for 17 European countries from the 2014 wave of the Household Finance and Consumption Survey, we find that households expecting a wealth transfer consume as if they were in a higher wealth decile. This increase in consumption differs in size depending on household wealth. We verify that this result is not related to risk preferences or liquidity constraints. These results provide support for consumption smoothing as predicted by the life-cycle model, although the extent of the smoothing depends on the position of the household in the wealth distribution.

Suggested Citation

  • Malo, Miguel Á. & Sciulli, Dario, 2023. "Expected wealth transfers and consumption across the wealth distribution in Europe," Economic Modelling, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:ecmode:v:126:y:2023:i:c:s0264999323002286
    DOI: 10.1016/j.econmod.2023.106416
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    More about this item

    Keywords

    Inheritances; Gifts; Expectations; Inequality; Liquidity constraints;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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