Wealth concentration and the contemporary dynamics of family formation

This project discusses the impact of changing family composition on household income inequality and the distribution of wealth in rich countries. Recent research suggests that smaller households are one of the strongest determinants of the increase in household income inequality in the last few decades. However, the impact of new forms of families on wealth distribution and transmission across generations remains largely unexplored. The presence of single-parent and same-sex biparental households can have implications for wealth distribution, particularly for those headed by women who may be more likely to experience poverty and have lower levels of wealth. In addition, inheritance rules, family size, and assortative mating can also affect wealth distribution. The government can play a role in reducing wealth inequality by implementing policies such as imposing taxes on wealth ownership or transfer and creating initiatives that encourage wealth accumulation among those at the lower end of the income spectrum. An inheritance tax is one such policy that can help redistribute wealth and prevent the concentration of wealth in a small number of families.
More in particular, the first part of this work explore how changes in household composition has affected recent trends in wealth inequality in Europe and in the U.S. Using microsimulation techniques and policy impact assessment, we explore the implications of changes in family formation on the distribution of wealth in the long-run and how tax and transfer policy would play out in this context.
Secondly, we examine the differences observed in wealth accumulation depending on the different household compositions. As mentioned earlier, in the recent years, households have changed, with the increase in single-parent and same-sex households and the decrease of families with children.
Finally, we exploit the reforms that changes some of the parameters of our previous model in some countries. First, several countries have implemented significant reforms to their inheritance laws, which may affect the transmission of wealth to the heirs. Also, there are several changes regarding marriage and divorce. The trend has been towards legal recognition of non-marital partnerships, which provides legal rights and protections to unmarried couples, including same-sex couples. Taking all together, these changes may affect the wealth distribution in the long run, not only because of the law changes regarding inheritance rules and taxation, but also because of the changes in the family composition that may arise as a result of the above-mentioned reforms.