Andrew, Megan, Erin Ruel, and Robert Hauser
Working paper no. 2008-16
Researchers have explored the considerable negative effect of an individual’s or his spouse’s poor health on their wealth accumulation. Health selection may also operate across generations, affecting the wealth of children whose parents suffer from poor health. We develop an intergenerational model of health selection in wealth using life course theory to understand whether parents’ non-fatal serious health events affect inter vivos financial transfers to children. First we estimate the effects of parents’ health shocks in adulthood on wealth accumulation, showing that data from the Wisconsin Longitudinal Study reproduce results from research using U.S. national panel studies and supporting the generalizability of our intergenerational health selection results. We find strong evidence of an intergenerational health selection effect. Individuals with less initial wealth are about 34 percent more likely to transfer money to their children and transfer 60 percent more money to their children when they do.