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Children of wealthy parents tend to become wealthy themselves. Such inheritance may operate through environmental pathways, but evidence for a genetic component to wealth accumulation also exists. Here, we study the causal relationship between genotype and wealth. Our theoretical framework shows that polygenic indices (PGIs), measures that aggregate numerous genetic influences towards a specific trait, may directly affect one's own asset accumulation through three distinct pathways: (1) by affecting earnings capacity, (2) by affecting the realized rate of return on assets and (3) by affecting one's savings rate. We test these hypotheses empirically by linking a large within-family panel data set with genotyped data, the Dutch Lifelines Biobank, with detailed data on asset accumulation throughout the life course, sourced from linkages to administrative records of the Dutch tax authorities. Using a sample of 8,637 genotyped individuals with at least one genotyped sibling or parent, we study the causal relationship between various PGIs on various measures of wealth, income, asset rates of return, and savings rates, using the natural experiment that conditional on parental genotype one's own genotype is random. Our findings indicate that a one standard deviation increase in a PGI for educational attainment increases one's position in the wealth distribution by 1.4 percentiles, or 12,693 EURO. Regarding mechanisms, we present evidence that this PGI increases earnings capacity, but also the capacity for better financial decision making. We find no substantial evidence that the PGI for educational attainment impacts one's savings rate.
Marina Aguiar Palma, Vrije Universiteit Amsterdam
Sjoerd van Alten, Vrije Universiteit Amsterdam
Silvia Barcellos, University of Southern California
Leandro Carvalho, University of Southern California
Titus Galama, Vrije Universiteit Amsterdam