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Everyone knows that the type of family you come from influences the type of life you have. If you grow up on the California coast in a family that surfs, you’re more likely to be a surfer compared to someone who lives in a place with no beaches. If your family loves sports, you may too. Seemingly every dentist I know has other family members who are also dentists. You get the idea.
And it’s generally accepted, if often begrudgingly, that this same principle applies to wealth: People from wealthier families tend to end up being more wealthy, and vice versa1.
But a research paper that recently landed on my radar2 suggests the effect is vastly more significant than many — or, at least, I — may have appreciated. The paper, titled “Intergenerational mobility in the very long run: Florence 1427-2011,”3 looked at 600 years of tax and surname data4 and ultimately found that people whose families were rich in Renaissance Florence still had a financial advantage as of 2011.
Being the descendants of a family at the 90th percentile of earnings distribution in 1427 instead of one at the 10th percentile would entail a 5% increase in earnings among current taxpayers. Wealth elasticity is also statistically significant and the magnitude of the implied effect is even larger: the 10th–90th exercise entails a 12% difference in real wealth today. Looking for non-linearities, we find some evidence of the existence of a glass floor that protects the descendants of the upper class from falling down the economic ladder.5.
In other words, the descendants of people who were wealthy 600 years ago continued to benefit all the way into the 21st century. Family influence evidently lasts a really, really long time.
The paper’s authors also note that up until now general consensus has been that your ancestors’ economic influence should “vanish in a few generations”6. But in fact this research shows “that the persistence of socioeconomic status in the long run is much higher than previously thought”.
So why does family economic influence last for so long?
The authors point to a few reasons, including evidence of “dynasties in certain (elite) occupations.” People living today may still be connected to those occupations, and these dynasties also may have influenced family inheritance patterns. The authors also explain that economic mobility was much lower in the 15th century — no surprise there — and that fact may have contributed to the extraordinarily long shadow cast by a family’s economic situation7.
Either way though, the paper’s authors ultimately argue in a summary of their work that their findings can be “thoughtfully extended to other advanced countries of Western Europe.” Put another way, the research looks at Florence, but the same thing probably happened elsewhere, with family influence extending across dozens of generations.
Let me get one thing out of the way here: I’d love to live in a more equal world. The authors of the paper repeatedly point out that there is greater economic mobility today than there was centuries ago, and I’m personally grateful for that. Say what you will about capitalism, but I’m happy that more people have more opportunities to improve their lot in life compared to 600 years ago — even if there’s still plenty more progress to be made on this front.
The paper’s authors also observe in their summary that there are a lot of disadvantages when it comes to societies that are dominated by the passing of socioeconomic advantage from one generation to the next. Such societies are often perceived as unfair, for instance, and “may also be less efficient as they waste the skills of those coming from disadvantaged backgrounds.”
All of which is to say that there are real reasons to aim for greater equality, and that observing the reality of intergenerational influence isn’t necessarily a celebration of that influence.
But even so, after reading this research I’m left grappling with its implications, including for my own family. Realistically, Renaissance Florence was multiple civilizations ago. The city has gone from being a republic to a dukedom to part of a kingdom to part of a fascist dictatorship to part of a modern democracy, among other things. The Renaissance, the Reformation, numerous small wars, the Napoleonic period, the Industrial Revolution, the two world wars and a lot of other major world events have swept across Europe in the six centuries covered by this new research on intergenerational wealth. In fact, Italy’s history has perhaps been especially tumultuous during that time; whereas places like England and France were already more or less cohesive kingdoms 600 years ago, Italy was still a patchwork of often-fighting principalities.
And yet, even despite the radical changes that have taken place, the influence of family survived. And that makes me suspect that whatever policy decisions we make today, whatever conflicts take place, however our society evolves (or, devolves as many social media users seem to believe it is doing), there’s a good chance that family influence will persist. Family has proven to be a more durable institution than national borders, political regimes or even economic systems.
Whether that’s good or bad, right or wrong, is kind of beside the point8. It’s the reality. And so for me at least, it's going to be a factor in critical decisions such as where to live, how many kids to have, what type of work to pursue, how much effort I put into relationships, etc. Individual decisions will only get you so far, but they do seem to matter; people who moved to Florence in the late 1300s, for example, were placing themselves (intentionally or not) at the center of what was about to be one of the most important cities in the world. They were significantly increasing their odds of having access to capital, art and culture. And the moves they made at that time are still influencing lives now.
The takeaway for me, then, is not so much that I specifically want my descendants to someday be in the 90th percentile of wage earners, though that would be great for them. But rather it’s the realization that the seeds of one person’s life are planted long, long before that person is ever born. I want my kids and my grandkids and their grandkids and so on to have the happiest lives possible. I want them to have access to the maximum number of opportunities. I hope they avoid financial stress and I’d love for them to have the “glass floor” the paper’s researchers mention, because that will help them avoid unnecessary hardship. I want, in other words, to maximize the positive impact I can have, because it’s clear that lives reverberate through time far longer than we might ever have guessed.
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Headlines to check out this week:
America Is Pursuing Happiness in All the Wrong Places
“Second, go out of your way to reject identity politics, and tell our shared story as Americans instead. If we want to find our way back as a nation, we must repudiate the poison of grievance and victimization and work instead to reestablish a healthy sense of meaning by constructing a narrative for our country that includes all of us.”
There’s a mountain of research supporting the idea that a family’s economic situation has a huge influence on wealth, though I think enough people intuitively understand this idea that I don’t need to go into detail on that research. The paper I cite in this blog post rehashes a bunch of past research on intergenerational mobility, in case you’re looking for some of that.
Special thanks to friend of the blog Alec Chapman for flagging this research for me.
The paper appears in The Review of Economic Studies, Volume 88, Issue 4, July 2021. The journal does not provide public access and I received a copy directly from the authors, but you can read an earlier working version here. There are some changes between the final paper and the earlier version, but the gist is the same. The authors also provided a non-technical summary of the work here if you want to get the basic idea of what this research is about without reading a lengthy technical paper.
I’m not going to go into detail on the researchers’ methodology here, but it is fascinating and offers a bit of a history lesson on Renaissance Florence. For example the city embarked on a comprehensive tax survey, which ultimately provided critical information for the researchers, thanks to a prolonged war with Milan that produced a financial crisis. Anyway, if you’re interested in the methodology, definitely check out the publicly available version of the paper.
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It is an interesting topic to debate, and I’m happy to have that debate. But when I think about how I’m actually going to live my life, ignoring reality is a sure way to fail.