In Uruguay, about one third of wealth is inherited – study

RIO DE JANEIRO, BRAZIL – In the recently published book “Los de arriba: estudios sobre la riqueza en Uruguay” (Fucvam), which includes articles by various national academics, economist Evelin Lasarga dedicated a chapter to analyzing the influence of inheritances on the distribution of wealth in the country.

The chapter begins by warning that the evidence base in Uruguay is limited for this type of work because there are “very few accumulated studies on inheritance, its characteristics and its impact on the distribution of wealth.”

The paper defines inheritance as: “wealth that belonged to another individual but was legally acquired by the death of that individual, inter-generational transfers or gifts between the living so that all arbitrary factors are included in the inter-generational transmission of inequality.”

The author notes that according to studies conducted by the National Institute of Statistics (INE) and the University of the Republic, about 71% of Uruguayans have some type of asset and 69% own a house, while 17% own a business. Of these percentages, the study says that of this 71% of the wealth, 23% was acquired through inheritance.

“If we look at the total stock of wealth, we find that about one-third of the total wealth comes from inheritance. The other two-thirds are mostly created or acquired wealth,” concludes the author.

At the same time, the paper asserts that there is a large accumulation in the highest sectors of society: the richest 10% capture 63% of the wealth and the richest 1% 28%. If we consider the top 5%, the hoarded wealth is almost half of the total wealth (49.9%).

Larsaga points out that “belonging to an inherited household and being a business owner has a positive impact on wealth ownership,” while educational climate has a lower incidence.

“The richest 1% of the population owns nearly 72% and the richest 5% own about 86% of businesses. Residential real estate is more evenly distributed than businesses, although there is also concentration,” says Larsaga, who adds that businesses are the most concentrated wealth.

She adds that half of the poorest population owns almost 4% of housing, while the richest 10% own 60% of the country’s real estate assets.

The author points out that when analyzing “the way wealth is acquired in the country, inherited wealth has a higher degree of concentration, as the richest tenth own 72% of inherited wealth compared to 59% of acquired wealth.”

“These data show that inherited wealth is more concentrated in the richest sectors of the population, as there seems to be no significant difference between the two types of wealth acquisition in the first five deciles,” Lasarga points out.

The inequality indices, he continues, confirm that inherited wealth “is the variable that is most concentrated, with a Gini index of 0.95 compared to a value of 0.72 for the general wealth level.”

Again, if the same index is taken to analyze income distribution, the index is about 0.4 in the country, according to the World Bank.

The Gini coefficient is a tool for measuring inequality, especially income inequality, although it is also used for other variables. The closer to 0, the greater the equality, while a tendency toward 1 means greater inequality.

Source: Montevideo Portal