The Carnegie Conjecture: Some Empirical Evidence

This paper examines tax-return-generated data on the labor force behavior of people before and after they receive inheritances. The results are consistent with Andrew Carnegie's century-old assertion that large inheritances decrease a person's labor force participation. For example, a single person who receives an inheritance of about 150, 000 is roughly four times more likely to leave the labor force than a person with an inheritance below 25, 000. Additional, albeit weaker, evidence suggests that large inheritances depress labor supply, even when participation is unaltered. Warren Kendall … heir to an insurance company fortune … says he's worth about 5 million and has an income of "about, oh, 300 and some thousand a year. " He has never held a job, or wanted to. Going down to sea in cruise ships is his full-time pursuit. He estimates that he has taken about 250 cruises over the past couple of decades, spending at least 50 percent to 70 percent of the year afloat Morgenthaler, 1991, p. Al.