This project will use Understanding Society, the family matrix and PEACH data on early childhood, to understand the long-run implications of house price increases for wealth, income and social inequality. The period 1996-2007 saw rapid increases in house prices, and large wealth gains for property owners. These increases had implications both for the labour supply, consumption and investment decisions of homeowners themselves as well as their offspring. We will study how wealth increases among parents causally affect outcomes for their children.

The fact that higher earning and wealthier parents have higher earning and wealthier children is now well-established. However, much less is currently known about the mechanisms underlying this relationship, which could reflect differences in parent’s behaviour, attitudes and networks as well as their financial resources. We address this important question using a novel approach: using variation in house price increases due to local housing supply constraints, and housing supply constraints in substitute localities, to identify how an exogenous change to parents’ wealth feeds through into various child outcomes.

Our work will be informative about how much financial redistribution can equalise opportunities for children in different families. Housing is currently taxed favourably compared to other forms of wealth, with primary residences not subject to capital gains tax or tax on rental income, and subject to additional exemptions for inheritance tax. We will shed important light on how changes in the tax system might affect the degree to which wealth is passed from one generation to the next.

Outputs

Levell, P., & Sturrock, D. (2023), Using Understanding Society to study intergenerational wealth mobility in the UK. Fiscal Studies, 44, 417–432. https://doi.org/10.1111/1475-5890.12352

Find out more about Peter’s work on his profile page.