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Inherited Wealth Comes Back in Style

By many measures, meritocracy is more prevalent now than a century or two ago. But when it comes to how people become wealthy, inheritance seems to play almost as big a role now as it did in the 19th century.

Based on an analysis of French data, Thomas Piketty finds that:

the annual inheritance flow was about 20%-25% of national income around 1900-1910. It then gradually fell to less than 10% in the 1920s-1930s, and to less than 5% in the 1950s. It has been rising regularly since then, with an acceleration of the trend during the past 20 years, and according to the latest data point (2008), it is now close to 15%.

(Piketty defines “inheritance flow” as “the total market value of all assets (real estate and financial assets, net of financial liabilities) transmitted at death or through inter-vivos gifts during a given year.")

And when measured as a fraction of disposable income, inheritance flows are almost equivalent with 19th century levels:

It seems likely that an analysis using U.S. data would find a similar result. Which, pessimistically, points to a limited role in economic growth by itself as an equalizer of the distribution of wealth.