Rising income and wealth inequality across the developed world has prompted a renewed focus on the mechanisms driving inequality. This paper contributes to the existing literature by studying the impact from life-cycle savings, intergenerational transfers, and fertility differences between the rich and the poor on the wealth distribution. We find that bequests increase the level of wealth inequality and that fertility differences between the rich and the poor amplify this relationship. The counterfactual exercises show that the interaction between bequests and differential fertility is quantitatively important for understanding wealth inequality in the United States.

This paper considers differential fertility and analyzes how the fertility of people caught in poverty disturbs their escape from poverty. For escape from poverty, it is necessary that the average human capital stock exceed certain thresholds before the ratio of the number of poor to rich people increases more rapidly than the human capital level of rich people. Thus, the escape depends on a race between the accumulation of human capital by the rich and the accumulation of children by the poor. A high initial ratio of the number of poor to rich people would imply persistent poverty.