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Bequests and labor supply in Germany

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  • Peters, Heiko
  • Schwarz, Peter

Abstract

Little is known on the effects of inheritances on the working behavior of heirs. Using panel data for Germany, we find behavioral responses that amount up to a 16% reduction in working hours for inheritances of one Mio Euro. For the majority of beneficiaries labor supply effects are, however, modest (owing to small amounts of inherited wealth). These results remain robust if we restrict the sample solely on those persons receiving an inheritance. Although more modest, higher inheritances promote a stronger adjustment in labor supply compared to small inheritances. In contrast to previous studies the partner does not adjust working hours and the full response takes place in the phase of the inheritance. Although negative income effects are present for all types of inheritances, behavioral responses are stronger if the heir receives liquid assets. The results depend, however, critically on the choice of the control group.

Suggested Citation

  • Peters, Heiko & Schwarz, Peter, 2013. "Bequests and labor supply in Germany," TranState Working Papers 173, University of Bremen, Collaborative Research Center 597: Transformations of the State.
    • Handle: RePEc:zbw:sfb597:173
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    Cited by:

    1. Andreas Eder, 2016. "The impact of inheritances on the retirement behavior of older Europeans," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(2), pages 299-331, May.

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    More about this item

    Keywords

    inheritance; labor supply; income effect; liquid assets;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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