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There has long been a debate about whether nature or nurture matters more in determining the traits an individual will have.
This column compares outcomes for adopted children in Sweden and those of their adoptive and biological parents and finds there is a substantial role for environment in the transmission of wealth and a much smaller role for pre-birth factors.
And while human capital linkages between parents and children appear to have stronger biological than environmental roots, earnings and income are, if anything, more environmental.
Another pathway is environment (nurture) – wealthier parents may invest more in their children’s human capital, help their children get better jobs, provide funding for business start-ups, give financial gifts, or affect child preferences or attitudes.
This channel suggests that intergenerational correlations arise through opportunities provided by the environment the child grows up in, and any child given these opportunities would benefit.
Wealth directly influences consumption and investment possibilities, and greater wealth may enable parents to invest more in children’s human capital by loosening budget constraints. One possible pathway is through biology (nature) – genetic inheritance of skills, attitudes, and preferences that correlate with higher wealth in each generation.
This channel suggests that intergenerational correlations arise because children from wealthy families are inherently more talented and would be wealthier than others even without the advantage of growing up with wealthier parents.We can thus examine whether adoptive parent wealth or biological parent wealth better predicts child wealth.To do so, we use Swedish administrative data on the net wealth and other characteristics of a large sample of adopted children born between 19 merged with similar information for their biological and adoptive parents, as well as corresponding data on own-birth children (children raised by their biological parents).Black, S E, P J Devereux, P Lundborg, and K Majlesi (2019), “Poor Little Rich Kids?The Role of Nature versus Nurture in Wealth and Other Economic Outcomes and Behaviors”, CEPR Discussion Paper 13559.We merge this to Swedish wealth data collected for tax purposes between 1999-2006.Finally, we also examine whether the forces that drive intergenerational wealth transmission look similar to the ones driving the persistence of other economic outcomes such as income and education.In Figure 2, we plot the biological and adoptive coefficients for the variables we study, also including the 45-degree line.Points above the line imply a larger role for environment (adoptive parent), while points below the line imply a greater role for biology (biological parent).Figure 1 shows the relationship between the within-cohort rank of child net wealth and that of their biological and adoptive parents.We see that the relationships are approximately linear and that the relationship between wealth of the child and the wealth of adoptive parents is stronger than the equivalent relationship with the wealth of the biological parents.