Wealthy, Wealthier, Wealthiest – The Role of Inheritances and Parental Background for the Structure of the Wealth Distribution and Top Wealth

How is wealth created and reproduced within the German society? What role do inheritances and parental background play for top wealth holdings? SOEP-P is a new and worldwide unique sample of wealthy individuals in Germany. It comprises more than 1,100 millionaires (with the richest person having a net wealth of more than 130 million Euros) and is fully integrated into the general SOEP household survey (SOEP-Core). This allows us to conduct comparable analyses of high net worth individuals and the rest of the population for the first time.

The project is divided into four work packages:

Work package 1): Correlates of individuals’ positions in the net wealth distribution

What distinguishes individuals at the top from individuals in the middle and bottom of the distribution? Using modern machine learning methods, we explore what characteristics are associated with belonging to the bottom 50 percent, the next 25 percent (upper middle class), the next highest 24 percent (wealthy) and the top one percent. Alongside comprehensive descriptive information on the correlates of wealth, this will provide first answers as to the sources of wealth for the wealthiest.

Work package 2): Counterfactual wealth distributions – the role of inheritances and bequests

What would the distribution of wealth look like if there were no inheritances or if they were distributed differently? To quantify the effect of inheritances and bequests we construct counterfactual wealth distributions. These findings are of particular interest in the German context, where family-owned businesses play an important role for the economy. The SOEP data allows us to investigate whether certain types of inheritances (business assets) lead to extremely high wealth positions.

Work package 3): Parental characteristics and the distribution of wealth – a mediation analysis

What role does parental background play beyond direct wealth transfers like inheritances or bequests? A mediation analysis will disentangle factors that are predetermined before adulthood (for example, individual characteristics or parental background) and factors that can be influenced by individual behavior (for example, efforts at qualification, career choice, saving/investment behavior).

Work package 4): Synthesis of results and policy conclusions

The last work package will synthesize and interpret the results in the light of current debates on inequalities. Results will be processed and disseminated to inform the public. Policy conclusions regarding taxation and incentives for wealth accumulation will be drawn.

Who are “the rich” in Germany? Is wealth in Germany primarily passive (securities) or active (entrepreneurship)? How strongly is the chance to accumulate wealth dependent on parental background and inheritances? To what extent does the distribution of wealth reflect differences in the distribution of opportunities? What implications do relative and absolute inequalities have for social cohesion?