Inequality of wealth between generations: do donations help young people to settle?

Summary In France, the wealth gap is growing between the older and younger generations, who are also inheriting more and more at a later age. Various tax measures have attempted to address this imbalance. In 2007, for example, the deduction on transfers to children was multiplied by three and raised to 150,000 euros. Since then, it has been reduced to 100,000 euros. Several studies show that parents are sensitive to the tax advantages granted to donations. Nevertheless, one may wonder about the impact of such transfers: how are donations, especially early ones, used? This article reminds us of the growing importance of transfers and wealth inequalities between generations in France. Data from the Insee Patrimoine 2010 survey are then used to study the impact of different forms of transfers (inter vivos or at death) on two key behaviors of the younger generations: the purchase of a primary residence and the creation of a business. We show that the probability of starting or taking over a business is higher when a gift has been received but not if an inheritance has been received. The probability of buying one's home increases with both forms of transfer. We propose several measures of the intensity of the link between transfers and investments. The link is stronger when the recipient of the transfer is young. The increase in real estate prices in the 2000s is said to be accompanied by a strengthening of the link between gifts and home purchases. Finally, we address the question of the causal effect of the gift: does the gift promote the decision to buy a home or does it accompany a decision that has already been made? We use the fact that the probability of receiving a donation decreases with the size of the siblings to show that the causal effect of the donation turns out to be higher than the effects previously identified.