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Scan the headlines and you might think that Western economies are on the verge of an ‘inheritance explosion’. Popular narratives warn of a looming ‘great wealth transfer’ as baby boomers pass down trillions, and some commentators fret about a new era of ‘inheritocracy’ in which an idle rich class dominates by virtue of birthright. The storyline is alarming: booming bequests funnel ever more unearned riches to heirs, widening inequality and sapping economic dynamism. This notion fits a broader anxiety of our age, that capitalism is hardening into a hereditary hierarchy, undermining the meritocratic ideal.

Yes, inheritance values are rising across the Western world. But this does not pose an existential threat to the economy, nor is it necessarily a drag on growth. Far from being a feudal relic that cements a permanent aristocracy, inherited wealth has changed in character and scale over time. Its relationship with growth and inequality is more complex than many assume.

For most people, inherited family wealth consists of a parents’ home or long-term savings. Occasionally, it is a family enterprise, and when such firms survive not just a few years but several decades, they reflect a form of entrepreneurship that thinks in generations rather than quarters. Recent research on inequality also suggests that inheritance can, in fact, reduce wealth gaps, as bequests tend to matter far more for less wealthy heirs. Taxing inheritances may seem like a neat solution to curb inequality, but in practice inheritance taxes have often proven inefficient and inequitable. As a result, many countries that once relied on them have quietly abandoned these taxes in favour of more effective capital income taxes targeting profits, dividends and realised gains, rather than wealth stocks and bequests.

In this essay, we take a reflective journey through the latest evidence and historical trends on inherited wealth. We explore how the role of inheritance has evolved over the past century, how bequests affect the distribution of wealth within and across generations, and whether inheritance taxation has a constructive role to play in a modern tax system. A nuanced picture emerges. While inheritance is not without challenges, it often fosters long-term investment and continuity, and attempts to heavily tax or curtail it have frequently backfired. Perhaps instead of fixating on what is passed down, we should focus on expanding who gets to build and eventually inherit wealth, through policies that spur growth, entrepreneurship and broad-based opportunity.

The dominant description of wealth in the late neoliberal era is one of burgeoning dynastic capitalism. In this view, the postwar period of relative equality has given way to a resurgence of inherited wealth. Economists have documented a rise in aggregate inheritance flows, that is, the total value of bequests and gifts each year, relative to national income. In countries such as France and the United Kingdom, inheritance flows that were modest in the mid-20th century have climbed back toward levels last seen in the early 1900s. My own historical data for Sweden show a similar pattern.

To critics, this trend signals a return to an era when economic rank was literally inherited, an age of rentier elites and ossified social mobility. Thomas Piketty, who has generated many of these long-run data series, warns of a revival of ‘patrimonial capitalism’, a society in which inherited fortunes overshadow self-made wealth. The term ‘inheritocracy’, recently highlighted in The Economist, neatly captures the fear of a society governed by heirs rather than merit.

The worry is that capital in the hands of less talented heirs than the original wealth creators could slow productivity

Several macroeconomic forces lie behind these trends. Western societies have grown both older and richer. Longer lifespans and higher accumulated wealth mean that older generations are bequeathing larger sums than their parents did. At the same time, wealth-to-income ratios in advanced economies have risen substantially alongside slower income growth. When total wealth swells, through rising stock markets, housing values and pension assets, even a constant propensity to leave bequests translates into larger inheritances relative to GDP. In this sense, part of the perceived ‘inheritance boom’ is simply a byproduct of prosperity. This nuance, however, is often lost in alarming headlines declaring that trillions will soon be ‘passed on’ to heirs.

Critics argue that rising inherited wealth undermines both fairness and efficiency. The fairness concern is straightforward: large inheritances confer advantages on people who did nothing to earn them, widening the gap between those born into affluence and those born to modest means. The efficiency concern is that capital in the hands of heirs, potentially less talented or motivated than the original wealth creators, could slow productivity. These worries are not new. A century ago, thinkers from Andrew Carnegie to European social democrats warned against concentrated dynastic wealth. Today, similar anxieties have returned, fuelling the belief that unchecked inheritance will entrench a new aristocracy and sap economic dynamism.

Before going further, it is worth clarifying what economists typically mean by ‘inheritance’, and what they do not. In the standard literature, inheritances are defined as the total net-of-tax value of all material transfers received at death, including bequests and life-insurance payouts. If a decedent has a positive net worth, the estate is distributed to heirs according to succession rules that usually reflect legal and genetic relationships. What is included depends on national law, but in most cases the focus is on tangible and financial assets: housing, land, businesses, stocks, bonds, and cash.

This definition deliberately excludes other powerful forms of intergenerational transmission.........

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