Parental Priorities and Economic Inequality

Abstract

Arguing that parental actions are important sources of wealth inequality, this book investigates the transmission of economic status from one generation to the next by constructing a model of parental preferences. It offers evidence on the intergenerational transmission of consumption, earnings and wealth. In the model, parents determine the degree of their altruistic concern for their children and spend time and resources on them accordingly, just as they might make choices about how they spend money. Mulligan tests his model against both old and new evidence, including models which emphasize financial constraints. One major prediction of Mulligan's model confirmed by the evidence is that children of wealthy parents typically spend more than they earn. Other important behaviour can also be explained using this approach, such as charitable giving and corporate loyalty. The study should appeal to a wide range of quantitatively-oriented social scientists and sociobiologists.