Intergenerational effects of parental wealth on children's housing wealth

Abstract

Past research has shown a close association of housing characteristics between generations. Previous evidence on the similarity of homeownership and housing value between parents and children reflects that inheritances and intergenerational wealth transfers play important roles in reinforcing and extending wealth inequality across generations. The purpose of this study is to examine how housing wealth and the timing of initial homeownership are affected by different characteristics of adult children and their parents using the Korean Labor and Income Panel Study. Special attention is given to the influence of parental economic resources on housing wealth and the timing of their children's initial homeownership in order to discern any intergenerational effects. The paper extends knowledge of ongoing intergenerational effects by analyzing the extent to which parental economic resources have a long-term effect on children's accumulation of net housing wealth. The findings indicate that children of wealthier parents have an economic head start: they transit more quickly to homeownership. Comparing net housing wealth between homeowners and renters reveals an increasing gap between the two groups. The results also show that the large gap in housing wealth can be partly attributed to differing parental wealth.