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Parental Death, Inheritance, and Labor Supply in the United States

December 2025

Written by: John Voorheis, Elif Tasar

Working Paper Number:

CES-25-71

Abstract

We are the first to study how inheritances affect labor supply in the U.S. using large-scale administrative data. Leveraging federal tax and Social Security records, we estimate event studies around parental death to investigate impacts on adult children. Our results indicate that the death of a last parent causes sizable gains in investment income'our main proxy for inheritances'and proportionate reductions in labor supply. On average, annual per-adult investment income at the tax unit level increases by about $300 (45 percent) and annual per-adult wage earnings decrease by $600 (2 percent). These earnings responses are large relative to the implied wealth transfer. Income effects are the dominant channel through which parental death reduces earnings, with children of wealthier parents exhibiting larger earnings reductions. Over six years, inheritances slightly equalize the distribution of investment income.

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Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

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state, retirement, wealth, pension, intergenerational, parents income, adoption, mortality, estimates intergenerational, grandparent

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Internal Revenue Service, Social Security Administration, Federal Reserve Bank, Federal Reserve System, Decennial Census, Employer Identification Numbers, Social Security, American Community Survey, Social Security Number, Health and Retirement Study, W-2, Master Address File, Census Bureau Master Address File, Census Bureau Disclosure Review Board, SSA Numident, Adjusted Gross Income, Survey of Consumer Finances, Cumulative Density Function

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