Presentation by Giovanni D'Alessio (Bank of Italy) OECD Conference on wealth inequalities: Measurement and policies Paris, 26 April 2018.

1. Intergenerational transfers
and wealth inequality:
some evidence for Italy
Giovanni D’Alessio
(Bank of Italy)
OECD Conference on wealth inequalities:
Measurement and policies
Paris - 26 April 2018

2.  Since 1966 (yearly up to 1986; every two
years since 1987)
 Sample 8,000 households (from 24,000 to
16,000 individuals)
 Since 1989 panel component (split sample)
 SHIW is part of HFCS (euro area household
survey) and LIS/LWS projects
 Main focus: Income, Wealth, Financial
behaviour (choices, knowledge, risks)
 Special modules (expectations, risk
aversion, social capital, capital gains,
housework, public services, tax evasion,
inheritances,…)
The Bank of Italy’s Survey of Household
Income and Wealth (SHIW)
The Bank of Italy’s survey of Household Income and Wealth (SHIW)
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3. Income and wealth inequality, 1968-2016
(Gini indexes)
The Bank of Italy’s survey of Household Income and Wealth (SHIW)
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0,25
0,30
0,35
0,40
0,45
0,50
0,55
0,60
0,45
0,50
0,55
0,60
0,65
0,70
0,75
0,80
1960 1970 1980 1990 2000 2010 2020
Household wealth
Household wealth (reconstructed)
Household income (right scale)
Equivalent income (right scale)
Household income - no financial income (right scale)
Source: Indexes on 1991-2016 wealth and 1977-2016 income are estimated using data from the SHIW Historical Archive.
Indexes on wealth before 1991 and on income before 1976 are estimated by Cannari and D’Alessio (2018).

4.  Questions on the origin of the house of residence and other real
estate held (since 1977)
 Special sections on inheritances:
 Transfers received (1991)
 Transfers received, given and expected (in and out) (2002)
 Transfers received (2014, HFCS section)
 Measurement problems (memory, evaluation, income streams,
capital gains, expectations)
Measuring intergenerational transfers in the SHIW
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Measuring intergenerational transfers in the SHIW

5. How did the household acquire ownership of the dwelling?
- purchased from private individual 1
- purchased from private firm/organization (e.g. construction company) 2
- purchased from public-sector firm/agency (e.g. pension fund) 3
- inherited 4
- part purchased/part inherited 5
- received as a gift 6
- built by household or as part of a cooperative 7
- other 8
In what year did the household acquire ownership of the dwelling?
- Year |___|___|___|___|
Questions on the origin of the house of residence
and other real estate held
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Measuring intergenerational transfers in the SHIW

6. Received houses (inheritances and gifts), 1977-2016
(share of net wealth)
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Vk = Value of houses received in the year k; p=probability of sale; r=rate of return
Worth noting: capital gains/losses are entirely attributed to inheritances/gifts
Measuring intergenerational transfers in the SHIW

7. Net wealth by age, 1991-2016
(index number, average=100)
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In the past 25 years strong changes occurred in the wealth distribution by age.
Young households are poorer while older households are richer than in the past
Measuring intergenerational transfers in the SHIW

8. Inherited wealth estimates based on the flow-to-stock method*,
1991-2016 (share of net wealth)
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Year
Flows/ net
wealth
Average gap
parents/off-
spring (years)
Share of inherited to total wealth (**)
r-n=0% r-n=0.5% r-n=1% r-n=2% r-n=3%
1989 0.90 29.6 26.7 28.8 31.1 36.4 43.0
1991 1.12 29.9 33.5 36.2 39.1 45.9 54.3
1993 0.94 29.9 28.1 30.4 32.8 38.5 45.6
1995 0.99 29.9 29.6 32.0 34.5 40.6 48.0
1998 1.12 29.9 33.5 36.1 39.0 45.8 54.2
2000 1.35 30.0 40.5 43.7 47.2 55.5 65.6
2002 1.16 30.3 35.1 37.9 41.0 48.2 57.2
2004 1.09 30.5 33.2 35.9 38.9 45.8 54.3
2006 1.15 30.8 35.4 38.3 41.4 48.9 58.2
2008 1.26 30.9 39.0 42.1 45.7 53.9 64.2
2010 1.26 31.2 39.3 42.5 46.1 54.6 65.1
2012 1.37 31.3 42.9 46.5 50.4 59.7 71.2
2014 1.34 31.8 42.6 46.2 50.2 59.6 71.4
2016 1.52 32.0 48.7 52.8 57.4 68.3 81.8
* Modigliani (1988)
** r = rate of return; n = rate of growth. Coefficients are supposed constant over time
Measuring intergenerational transfers in the SHIW
)()1( )(
nreBW gnre
−−= −

9. 20
30
40
50
60
70
80
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
r = n
r-n = 1%
r-n = 2%
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Inherited wealth estimates based on the flow-to-stock method*,
1991-2016 (share of net wealth)
Source: Calculations based on SHIW data.
* Modigliani (1988)
** r = rate of return; n = rate of growth. The coefficients are suppose constant over time
Measuring intergenerational transfers in the SHIW

10. 10
In the 2002 survey, household heads and their spouses/cohabitants
were asked to indicate both the value of the Capital Transfers (CT)
(bequests and gifts) made and received during the respondent’s
lifetime and those that they expected to make or receive in the
future
Special 2002 module on inheritances and gifts
Past transfers: memory bias, evaluation issues
Future transfers: expectations, plans, hopes
Measuring intergenerational transfers in the SHIW
Life Cycle Wealth = NW + T Given - T Received
Future consumption = NW + T to be Received - T to be Given

11. Correlation coefficients among transfers, income and wealth
Source: Cannari and D'Alessio (2008). Transfers include the capitalisation of interest.
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Transfers
received
Transfers
given
Transfers
to be
received
Transfers
to be
given
Net
wealth
Income
Life- cycle
wealth
Transfers received 1.00
Transfers given 0.19 1.00
Transfers to be received 0.02 0.01 1.00
Transfers to be given 0.24 0.06 0.19 1.00
Net wealth 0.39 0.07 0.11 0.55 1.00
Income 0.23 0.05 0.15 0.41 0.58 1.00
Life cycle wealth -0.72 0.01 0.06 0.16 0.34 0.20 1.00
Measuring intergenerational transfers in the SHIW
Transfers received are highly concentrated (0.89) but the coefficient of variation of LCW
is greater than that of Net Wealth. No equalising effect but people tend to react to
transfers.

12. 12
Transfers
received or to
be received
Transfers
given or to be
given
Lifetime
resources
Lifetime
income
Transfers received or to be received 1.00
Transfers given or to be given 0.34 1.00
Lifetime resources 0.31 0.26 1.00
Lifetime income 0.10 0.20 0.98 1.00
Lifetime transfers, income and resources
Measuring intergenerational transfers in the SHIW
Source: Cannari and D'Alessio (2008). Transfers include the capitalisation of interest.
Lifetime indicators (transfers, income and resources) are all discounted at 15 years
Collected measures allow the computation of lifetime transfers
 You can compare lifetime transfers with lifetime income (estimated as sum of income
from labour or pensions at each age of the household head/spouse on the basis of
invariant characteristics of individuals and a residual, which is assumed to follow a first
order autoregressive process, with parameter r=0.9, estimated panel sample 1998-2002)
Correlation coefficients among lifetime indicators

13. Inheritances, gifts and lifetime household income
(Thousand euro, discounted at 15 years)
 The gap in terms of lifetime income between those who receive and those who don’t
receive transfers, is equal to 25,7%; it becomes 38,8 % in terms of lifetime
resources. For the top 10% households, the initial gap of 40% becomes 80%
Received transfers
Share of
population
(%)
Transfers
received
Lifetime
income
Lifetime
resources
Households who don’t receive 58.9 0 901 901
Households who receive 41.1 117 1,132 1,250
…of which the top 10 per cent 10.0 353 1,263 1,616
Total 100.0 48 996 1,044
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Measuring intergenerational transfers in the SHIW

14. Correlation coefficients between years of education of household
head and his/her father and mother by cohort
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Measuring intergenerational transfers in the SHIW
Source: Calculations based on SHIW data.

15. Take home messages
• Received inheritances and gifts are a large share of net
wealth (in Italy as well as in other european countries)
• The above share is growing over time
• Also expected inheritances/gifts are important (but data
are more complex to collect)
• Wealth transfers are positively correlated with human
capital transfers. They are not the only (and maybe not
even the main) channel for intergenerational transmission
of inequality
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16. Thanks for your attention
Sources: all calculations are based on SHIW data (available at www.bancaditalia.it.)
References:
• Cannari L., G. D'Alessio (2008), Intergenerational Transfers in Italy, MPRA
Paper 15111, University Library of Munich, Germany.
• Cannari L., G. D'Alessio (2018), Wealth inequality in Italy: reconstruction of
1968-75 data and comparison with recent estimates, Questioni di economia e
finanza (Occasional Paper), Banca d’Italia, No. 428.
• Modigliani, F. (1988), The Role of Intergenerational Transfers and the Life Cycle
Saving in the Accumulation of Wealth”, Journal of Economic Perspectives, Vol.
2, No. 1, pp. 15-40.
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