Intergenerational Transfers and Inequality

Abstract The chapter reviews the role of intergenerational transfers in determining inequality. It distinguishes, for instance, between (largely) unintended bequests, where individuals save for retirement but die earlier than the longest contingency upon which they planned for, and planned bequests, and transfers through human and financial capital. The chapter introduces the use of diffusion equations to study the long run stochastic equilibrium, combining results from stochastic differential equations with those of long run growth theory. At the same time, more conventional approaches using stochastic difference equations enable us to derive strong results relating the long run variance of wealth to key…