Intergenerational health selection in wealth: A first look at parents’ health events and inter vivos financial transfers

Researchers have explored the considerable negative effect of an individual’s or his spouse’s poor health on their wealth accumulation. Health selection may also operate across generations, affecting the wealth of children whose parents suffer from poor health. We develop an intergenerational model of health selection in wealth using life course theory to understand whether parents’ non-fatal serious health events affect inter vivos financial transfers to children. First, we estimate the relationship between parents’ serious health events in adulthood and wealth accumulation, showing that data from the Wisconsin Longitudinal Study reproduce results from research using U.S. national panel studies and supporting the generalizability of our intergenerational health selection results. Second, we find strong evidence of intergenerational health selection. Individuals with less initial wealth and who experience a serious health event are about 34% more likely to transfer money to their children and transfer 60% more money to their children when they do.