How do they shape the German wealth distribution?

This paper uses SOEP data to study the distributional e ect of intergenerational trans- fers on the wealth distribution of German households. Similar to most other central Eu- ropean countries, Germany is likely to face a period of increasing aggregate bequest ows. At the same time, there is an ongoing debate on the distributional implications of such wealth shocks. This study adds to the discussion by providing causal estimates for the e ect of transfer receipt on the savings behavior of households. The model allows for dynamic adjustment and variations in the savings behavior over the wealth distribution. I use the estimates to decompose the overall e ect of transfers on wealth inequality in the e ect of the aggregated transfer volume, the transfer incidence over the wealth distribution and the e ect of the savings behavior. The results are very much in line with the literature, indicating that transfers tend to equalize wealth inequality, despite minor variations in the savings behav- ior over the wealth distribution and despite a strong relationship between initial household wealth and transfer accrual

Measuring ageing and the need for longer working lives in the EU. CEPS Working Document No. 417/February 2016 Wednesday, 24 February 2016

This study considers different ways of measuring the ageing of societies and their implications for public policy. The first part characterises the ongoing ageing of the population in the EU28 by relating it to past and future longer-term demographic trends for broad groups of countries. It goes beyond traditional chronological measures to include recently suggested prospective measures of ageing. The second part of the study is concerned with economic dependency ratios; a more relevant measure for summarising the economic challenges related to ageing. Three main findings emerge: first, prospective indicators of ageing reveal the challenge of population ageing to be less onerous than traditional chronological measures would suggest. Their relevance, however, will depend on the degree to which policy changes can respond to the changing age structure of the population. Second, substantial increases in the length of working lives are necessary to maintain current economic dependency ratios. Taking a year-2000 perspective view of the economic challenges of ageing shows that substantial progress has been made. Third, looking towards 2050, education will have limited direct impact on the scale of the ageing challenge

Measuring Dependency Ratios using National Transfer Accounts. CEPS Working Document No. 420/April 2016

It is now widely recognised that the socio-economic changes that ageing societies will bring about are poorly captured by the traditional demographic dependency ratios (DDRs), such as the old-age dependency ratio that relates the number of people aged 65+ to the working-age population. Future older generations will have increasingly better health and are likely to work longer. By combining population projections and National Transfer Accounts (NTA) data for seven European countries, we project the quantitative impact of ageing on public finances until 2040 and compare it to projected DDRs. We then simulate the public finance impact of changes in three key indicators related to the policy responses to population ageing: net immigration, healthy ageing and longer working lives. We do this by linking age-specific public health transfers and labour market participation rates to changes in mortality. Four main findings emerge: first, the simple old-age dependency ratio overestimates the future public finance challenges faced by the countries studied – significantly so for some countries, e.g. Austria, Finland and Hungary. Second, healthy ageing has a modest effect (on public finances) except in the case of Sweden, where it is substantial. Third, the long-run effect of immigration is well captured by the simple DDR measure if immigrants are similar to the native population. Finally, increasing the length of working lives is central to addressing the public finance challenge of ageing. Extending the length of working lives by three to four years over the next 25 years – equivalent to the increase in life expectancy – severely limits the impact of ageing on public transfers

How Inheritances Affect Retirement Plannings

This study uses the German SAVE panel study in order to estimate the effect of intergenerational transfers on the expected retirement entry age of individuals. The literature in this field typically estimates the transfer effect on the actual retirement probability. We suggest to base the analysis on the expected retirement age instead. This entails two methodological advantages: First, it is possible to exploit the within individual variation for the entire sample (even of those who do not retire) and thereby permits to analyze the life-cycle considerations of younger age groups. Second, the effect size can easily be expressed in terms of time and thereby monetary opportunity costs. We find that heirs expect to retire earlier, even when receipts are expected to some degree. Specifically, heirs plan to retire four to five months earlier and thereby accept costs in the form of foregone income and pension entitlements corresponding to 20-30% of the inheritance

Extending working life in Finland. CEPS Working Document No. 387, 22 November 2013

This report reviews national and private initiatives to allow the elderly to continue their participation in the Finnish labour market and provides an analysis of the labour market and living conditions of seniors. We are interested in how those over 50 can be engaged in various forms of employment and lifelong learning. We find strong evidence that Finland generally provides good institutional conditions for active ageing. The quick and early ageing process was tackled by the fundamental pension reform that already prolonged retirement substantially and will probably facilitate later retirement as the attitudes concerning retirement change. On the other hand, Finland still seems to lag behind the other Nordic welfare states, has considerable problems in providing the same health conditions to low educated people in physically demanding occupations and could - – with respect to family pension in particular – invest further efforts in reforming the pension system. While many of the reforms Finland has conducted seem to be favourable and transferable to other European countries that still face the steepest phases of ageing in their societies, a reluctance towards changing attitudes that we observe in Finland, shows that organizing active ageing is a long-term project

Essays über die Ökonomie intergenerationeller Vermögenstransfers

The thesis consists of five chapters that analyze the economic implications of intergenerational wealth transfers (inheritances or inter-vivo gifts) with respect to the behavioral adjustments of receiving households and with respect to wealth inequality. The first chapter provides an introduction to the broader scientific debate on intergenerational wealth transfers. In the second chapter we use data from the European Household Finance and Consumption Survey in order to examine the distributional effects of intergenerational wealth transfers on the net worth distribution in 8 European countries and compare it to recent findings for the US. To do so, we resort to the decomposition of the coefficient of variation as suggested and applied by Wolff (1987, 2002, 2015) and Wolff and Gittleman (2014). The results hint that inheritances and gifts have a vastly equalizing effect on inequality in household wealth in all eight countries. This decomposition approach, while being frequently used in the literature, neglects potential behavioral adjustments of the transfer-receiving households. Two of the remaining chapters of the dissertation seek to measure and take into account such behavioral effects: Chapter three uses the German SAVE panel study in order to estimate the effect of intergenerational transfers on the retirement behavior of individuals. The literature in this field typically estimates the transfer effect on the actual retirement probability. We suggest to base the analysis on the expected retirement age instead. This entails two methodological advantages: First, it is possible to exploit the within individual variation for the entire sample (even of those who do not yet retire) and thereby permits to analyze a key trade-off in the life-cycle plannings of individuals. Second, the effect size can easily be expressed in terms of time and thereby monetary opportunity costs. We find that heirs expect to retire earlier, even when receipts are expected to some degree. Specifically, heirs plan to retire four to five months earlier and thereby accept costs in the form of foregone income and pension entitlements corresponding to 20-30 % of the inheritance. Chapter four shifts the focus on the savings behavior of households after transfer receipt. It uses SOEP data to study the distributional effect of intergenerational transfers on the wealth distribution of German households. Similar to most other central European countries, Germany is likely to face a period of increasing aggregate bequest flows. At the same time, there is an ongoing debate on the distributional implications of such wealth shocks. This study adds to the discussion by providing causal estimates for the effect of transfer receipt on the savings behavior of households. The model allows for dynamic adjustment and variations in the savings behavior over the wealth distribution. I use the estimates to decompose the overall effect of transfers on wealth inequality in the effect of the aggregated transfer volume, the transfer incidence over the wealth distribution and the effect of the savings behavior. The results are very much in line with the literature, indicating that transfers tend to equalize wealth inequality, despite minor variations in the savings behavior over the wealth distribution and despite a strong relationship between initial household wealth and transfer accrual. Chapter five is a theoretical chapter that seeks to line out the redistributional motives the social planner has to take into account when designing an optimal inheritance taxation. To do so, we derive optimal nonlinear inheritance and linear income tax rates in a two generations model of inheritance where parents differ by their preferences for bequeathing. We provide simulations that show that results depend crucially on the degree of the so-called “double counting" of the heirs' utility in the social welfare function. We allow for income effects and characterize the entire tax schedule. Detailed simulations illustrate the implications of parental preferences interacting with social discounting. Optimal inheritance tax rates are negative and progressive unless double counting is minimal. The reasons are an intergenerational redistributive motive due to double counting and an intragenerational redistributive motive for the generation of heirs. For some parameterizations with limited double counting, an intragenerational redistributive motive for the generation of parents can lead to an optimal regressive inheritance tax.Die Dissertationsschrift besteht aus fünf Kapiteln, die die ökonomischen Implikationen von intergenerationellen Vermögenstransfers in Bezug auf Verhaltensanpassungen der erhaltenden Haushalte und in Bezug auf die Vermögensungleichheit untersuchen. Das erste Kapitel führt in die wissenschaftliche Debatte um Erbschaften und Schenkungen ein. Im zweiten Kapitel nutzen wir Daten der European Household Finance and Consumption Survey um die Effekte von Vermögenstransfers auf die Verteilung der Nettovermögen der Haushalte in 8 europäischen Ländern zu untersuchen. Dafür verwenden wir einen Zerlegungsansatz für den Varianzkoeffizienten, der von Wolff vorgeschlagen und mehrfach von Wolff (1987, 2002, 2015) sowie von Wolff und Gittleman (2015) angewendet wurde. Die Ergebnisse legen nahe, dass Erbschaften und Schenkungen einen weithin angleichenden Effekt auf die Verteilung der Vermögen in allen 8 Ländern haben. Der verwendete Zerlegungsansatz hat allerdings die Schwäche, potentielle Verhaltensanpassungen der Empfängerhaushalte zu vernachlässigen. Zwei der drei folgenden Kapitel der Dissertation versuchen deshalb solche Anpassungen zu berücksichtigen. Kapitel drei nutzt Daten der deutschen SAVE Panel-Studie, um den Effekt von intergenerationellen Vermögenstransfers auf das Verrentungsverhalten der Individuen zu untersuchen. In der Literatur wird dieser Zusammenhang typischerweise durch Änderungen in der bedingten Wahrscheinlichkeit eines Renteneintritts gemessen. Wir schlagen stattdessen vor, die Analyse auf dem erwarteten Renteneintrittsalter aufzubauen. Dieses Vorgehen birgt zwei methodische Vorteile: Es ist möglich, die Variation in den Angaben der Individuen über die Zeit zu berücksichtigen und so für zeitkonstante unbeobachtete Heterogenität zu kontrollieren. Außerdem lässt sich auch für Individuen, die wir noch nicht beim Renteneintritt beobachten können, untersuchen, wie sie eine ihrer über den Lebenszyklus zentralen finanziellen Entscheidungen zu treffen planen. Die Effektgrößte kann leicht auf Zeitintervalle bezogen werden, womit es möglich ist, die dem Individuum entstehenden Opportunitätskosten abzubilden. Unsere Ergebnisse legen nahe, dass Erben erwarten früher in Rente zu gehen, selbst wenn die Erbschaft z. T. erwartet wird. Durchschnittlich planen Erben einen etwa vier bis fünf Monate früheren Renteneintritt, was Kosten in Form von ausfallenden Erwerbseinkommen und geringeren Rentenanwartschaften bedeutet, die sich auf etwa 20-30% der Erbschaft belaufen. Kapitel 4 basiert auf Daten des SOEP und richtet den Fokus auf die Ersparnisbildung von Haushalten nach Erbschaftszugang: Ich schätze hier den kausalen Effekt des Transferzugangs auf die Ersparnisbildung und berücksichtige diese Verhaltensanpassung in der Analyse der Effekte von Transfers auf die Vermögensverteilung. Das geschätzte Modell berücksichtigt dynamische Verhaltensanpassungen und Unterschiede im Sparverhalten über die Vermögensverteilung. Die Schätzungen verwende ich dann, um den Verteilungseffekt von Erbschaften auf Vermögen in die Beiträge der Erbschaftsinzidenz und des Sparverhaltens zu zerlegen. Die Ergebnisse stimmen weithin mit denen vergleichbarer Studien überein und legen nahe, dass Erbschaften die Vermögensverteilung angleichen, obwohl reichere Haushalte tendenziell höhere Erbschaften und Schenkungen erhalten als ärmere. Kapitel 5 ist ein theoretischer Beitrag, der verschiedene Umverteilungsmotive des sozialen Planers bei der optimalen Erbschaftsbesteuerung offenzulegen versucht. Wir leiten hier eine optimale nichtlineare Erbschaftsbesteuerung und eine lineare Einkommenssteuer in einem Zweigenerationenmodell her, in dem sich Eltern in ihrer Vererbungspräferenz unterscheiden. Wir nutzen Simulationen, um zu zeigen, dass in der Literatur prominent vertretene Steuerstrukturen nur unter bestimmten Parametrisierungen gelten und insbesondere vom in der Literatur umstrittenen „double-counting“ abhängen. Unser Modell lässt Einkommenseffekte zu und charakterisiert das gesamte Steuersystem. In den detaillierten Simulationen zeigen wir, dass die unterschiedliche Vererbungsneigung der Eltern mit dem „double-counting“ des Nutzens der Erben in der sozialen Wohlfahrtsfunktion interagiert. Die optimale Erbschaftssteuer ist in unserem Modell grundsätzlich negativ und progressiv, kann allerdings bei geringem „double-counting“ regressiv werden