Inheritances, social classes, and wealth distribution

TL;DR

This paper presents a simple theoretical model analyzing how inheritances influence wealth distribution and inequality, showing that varying offspring probabilities and class-based marriage probabilities lead to different wealth distribution regimes.

Contribution

It introduces a model that links inheritance, offspring distribution, and social class interactions to wealth inequality and distribution patterns.

Findings

Inequality arises when offspring numbers vary across families.

Realistic offspring distributions predict a Gini coefficient of about 0.3.

Wealth distribution transitions from exponential to power-law with increased class distinctions.

Abstract

We consider a simple theoretical model to investigate the impact of inheritances on the wealth distribution. Wealth is described as a finite resource, which remains constant over different generations and is divided equally among offspring. All other sources of wealth are neglected. We consider different societies characterized by a different offspring probability distribution. We find that, if the population remains constant, the society reaches a stationary wealth distribution. We show that inequality emerges every time the number of children per family is not always the same. For realistic offspring distributions from developed countries, the model predicts a Gini coefficient of $G\approx 0.3$. If we divide the society into wealth classes and set the probability of getting married to depend on the distance between classes, the stationary wealth distribution crosses over from an exponential to a power-law regime as the number of wealth classes and the level of class distinction increase.