Intergenerational Wealth Transmission and the Dynamics of Inequality in Small-Scale Societies

Abstract

Small-scale human societies range from foraging bands with a strong egalitarian ethos to more economically stratified agrarian and pastoral societies. We explain this variation in inequality using a dynamic model in which a population’s long-run steady-state level of inequality depends on the extent to which its most important forms of wealth are transmitted within families across generations. We estimate the degree of intergenerational transmission of three different types of wealth (material, embodied, and relational) as well as the extent of wealth inequality in 21 historical and contemporary populations. We show that intergenerational transmission of wealth and wealth inequality are substantial among pastoral and small-scale agricultural societies (on a par with or even exceeding the most unequal modern industrial economies) and quite limited among horticultural and foraging peoples (equivalent to the most egalitarian of modern industrial populations). Differences in the technology by which a people derive their livelihood and in the institutions and norms making up the economic system jointly contribute to this pattern.

Investigations of the dynamics of economic inequality across distinct economic systems have been limited by the paucity of data on all but contemporary market-based industrial societies. They are also hampered by the lack of an empirically-based model applicable to the differing institutions and technologies characteristic of the broad range of economic systems, ranging from hunter-gatherers through pastoral and agrarian societies to modern economies. Here we present empirical estimates of the extent of inheritance of wealth across generations and of the degree of wealth inequality, along with a descriptive model of the relationship between the two. We support our model with data on three distinct wealth classes – material, embodied and relational, to be defined below – in 21 contemporary and recent hunter-gatherer, horticultural, pastoral and agricultural populations.

The key thesis to be explored is that for some kinds of wealth and some economic systems (but not others) the parents’ wealth strongly predicts the wealth of the offspring. In particular, the cattle, land and other types of material wealth of pastoral and agricultural economies are directly transmitted by simple transfers, often buttressed by social conventions of inheritance. By contrast the somatic wealth and skills and the social network ties central to foraging and horticultural livelihoods are more subject to the vagaries of learning, genetic recombination, and childhood development. Moreover, in foraging and horticultural economies, such material wealth as exists tends to circulate through broad social networks rather than being vertically transmitted to offspring. A corollary of the thesis is that, if our model is correct, economies in which material wealth is important will show substantial levels of wealth inequality.

Both the thesis and the corollary find strong support in our data. We focus on small-scale societies because they offer the greatest variation in both the technologies by which a livelihood is gained and the basic institutions that provide the incentives and constraints regulating economic life, including the dynamics of inequality and the inheritance process. (We use the term “small-scale” to refer to populations in which the influence of modern national states is limited). These societies thus provide the most powerful lens for exploring hypotheses concerning the importance of technologies (kinds of wealth) and institutions (kinds of society) in explaining the dynamics of inequality, and thus may also illuminate long term trends in contemporary and future economies.

The connection of wealth inheritance to wealth inequality (explained more precisely in the model below) is the following. If wealth is strongly transmitted across generations, chance shocks to the economic fortunes of a household due to disease or accident, luck in a hunt or harvest, and other environmental disturbances or windfalls will be reproduced in the next generation. These effects will thus accumulate over time, and thereby counteract the widely-observed inequality-dampening tendency of regression to the mean (1–3). We seek to understand the effects of this process by examining how the offsetting effects of random shocks and imperfect transmission across generations jointly determine a steady-state distribution of wealth for differing kinds of wealth and across the four different economic systems. The institutions and norms that characterize distinct economic systems and the nature of the wealth class alike will affect the degree of intergenerational transmission. The extent of shocks will also differ across wealth classes and economic systems.

For a number of modern economies there are quantitative estimates and comparisons of the intergenerational transmission of education, occupational prestige, non-human physical capital and other forms of embodied and material wealth (3–5). For small-scale populations, relationships among reproductive success and material forms of wealth have been studied (6), and there exist piecemeal estimates of intergenerational transmission of, for example, fertility (7) and height (8). But there are no estimates allowing a comparison across populations of the inheritance of the distinctive kinds of wealth that are central to the livelihoods of small-scale communities of foragers, horticulturalists, herders and farmers. Here we present a new set of data and conduct a quantitative comparative analysis of the transmission of distinct types of wealth among the 21 populations shown in Figure 1 and Table 1. Further information is provided in (9).

Figure 1. Populations studied.

Note: Circle indicates hunter-gatherers, star horticulturalists; square pastoralists, and triangle agriculturalists.

Table 1.

Population characteristics and estimates of the intergenerational transmission of 43 measures of embodied, relational, and material wealth across 5 hunter-gatherer, 4 horticultural, 4 pastoral and 8 agricultural populations

Economic System & Population	Wealth Type & (Number of parent-child pairs)	Wealth Class	β (Standard Error)	General Description & Bibliographic Source
Hunter-Gatherer
Ache	Hunting returns (49)	E	0.081 (0.273)	Mobile foragers (Paraguay 1982–2008) (30)
Ache	Body weight (137)	E	0.509 (0.128)
Hadza	Body weight (227)	E	0.305 (0.076)	Mobile foragers (Tanzania 1982–2008) (31)
Hadza	Grip strength (196)	E	−0.044 (0.050)
Hadza	Foraging returns (33)	E	0.047 (0.193)
Ju/'’hoansi	Exchange partners (26)	R	0.208 (0.114)	Mobile foragers (Botswana (1973–75) (32)
Lamalera	Quality of housing (121)	M	0.218 (0.099)	Sedentary fishers, trade and some farming (Indonesia 2006) (33)
Lamalera	Boat shares (121)	M	0.122 (0.093)
Lamalera	Food share partners (119)	R	0.251 (0.052)
Lamalera	Reproductive success (121)	E	0.161 (0.174)
Meriam	Reproductive success (91)	E	0.088 (0.247)	Sedentary fishers, some farming (Australia 1998) (34)
Horticultural
Dominicans	Land (62)	M	0.137 (0.140)	Subsistence farming, fishing, bay oil production, limited wages (Dominica 2000–08) (35)
Gambians	Body weight (1274)	E	0.391 (0.041)	Subsistence rice and cash farmers (Gambia 1950–80) (36)
Gambians	Reproductive success (967)	E	0.088 (0.086)
Pimbwe	House/farm utensils (283)	M	0.107 (0.318)	Subsistence farming, some cash farming, with fishing (Tanzania 1995–2006) (37)
Pimbwe	Farming skill (217)	E	−0.015 (0.097)
Pimbwe	Body weight (148)	E	0.377 (0.096)
Pimbwe	Reproductive success (599)	E	−0.057 (0.107)
Tsimane	Household utensils (110)	M	0.024 (0.071)	Subsistence farming, some foraging (Bolivia 2002–08) (38)
Tsimane	Labour cooperation (67)	R	0.181 (0.106)
Tsimane	Allies in conflict (45)	R	0.338 (0.103)
Tsimane	Knowledge/skill (181)	E	0.111 (0.094)
Tsimane	Grip strength (490)	E	0.070 (0.042)
Tsimane	Body weight (383)	E	0.253 (0.069)
Tsimane	Hunting returns (26)	E	0.384 (0.130)
Tsimane	Reproductive success (849)	E	0.128 (0.073)
Pastoral
Datoga	Livestock (135)	M.	0.622 (0.127)	Transhumant pastoralism, some farming (Tanzania 1987–89) (39)
Datoga	Reproductive success (133)	E	0.066 (0.060)
Juhaina Arabs	Camels (21)	M	0.535 (0.226)	Transhumant pastoralism (Chad 2003) (40)
Sangu (Ukwaheri)	Cattle (108)	M	0.957 (0.424)	Pastoralism, some farming (Tanzania1997–2000) (41)
Yomut (Charwa)	Patrimony (livestock) (22)	M	0.564 (0.167)	Transhumant pastoralism, with some farming (Turkmenistan/Iran 1965–74) (42)
Agricultural
Bengali	Reproductive success (382)	E	−0.074 (0.057)	Farmers with wage labor (India 2000–01) (43)
Bengaluru	In-law networks (249)	R	0.114 (0.073)	Farmers, merchants, wage labor, urban (India 1910–1973) (44)
East Anglians	Estate value (land) (210)	M	0.642 (0.073)	Farmers, wage labor, merchants; rural and urban (England 1540–1845) (45)
East Anglians	Reproductive success (200)	E	0.171 (0.150)
Khasi	Reproductive success (650)	E	0.165 (0.045)	Farmers with wage labor (India 2000–01) (43)
Kipsigis	Land (270)	M	0.357 (0.041)	Farmers with livestock (Kenya1981–1990) (46)
Kipsigis	Livestock (270)	M	0.635 (0.098)
Kipsigis	Cattle partners (102)	R	0.041 (0.139)
Kipsigis	Reproductive success (270)	E	0.213 (0.106)
Krummhörn	Land (1602)	M	0.610 (0.043)	Farmers with diverse off-farm occupations (German 17th –19th century) (47)
Skellefteå	Reproductive success (2515)	E	0.010 (0.028)	Farmers with diverse off-farm occupations (Sweden 1800–88) (48)
Yomut (Chomur)	Patrimony (land) (58)	M	0.528 (0.147)	Farmers with livestock (Turkmenistan/Iran 1965–74) (42)

The dynamics of wealth inequality

To clarify our model, we initially consider just a single type of wealth and show that the degree of inequality in its steady-state distribution depends on the extent to which wealth is transmitted across generations. Suppose that a household’s wealth is acquired in two ways. The first is transmission directly from the parents, in the form of material bequests, labor, skills, private information, genotype, conditions affecting development, network connections, and so on. The second way of acquiring wealth is from the resources available to all members of the population, in the form, say, of equal access to common resources or public information.

We summarize the parental and non-parental influences on a household’s wealth by expressing the expected wealth of household i as βw_ip + (1−β)w, where wealth is measured in natural logarithms, w_ip is the wealth level of household i’s parents and w is the population-average wealth level (normalized to be the same across generations). The intergenerational transmission coefficient, β (0 ≤ β < 1), measures the extent to which the wealth of a household in one generation depends on the wealth in the previous generation, and (1−β) represents regression to the mean as introduced by Galton in his study of human stature (10).

In each generation, the realized wealth of a household is its expected wealth (above) plus a disturbance term, λ, reflecting exogenous shocks that over time are assumed to be independent of the wealth of previous generations, with mean zero and variance σ_λ²:

$$w_{\text{i}}=\beta w_{\text{ip}}+(1-\beta )\underset{\_}{w}+{\lambda }_{\text{i}}$$ (1)

We are interested in the variance of the logarithm of a population’s wealth (a standard unit-free measure of inequality) in the long run. To determine this, we use equation (1) to write the variance of wealth in generation t as:

$$var(w_{\text{it}})\equiv {\mu }_{\text{t}}={\beta }^2{\mu }_{\text{t}-1}+{{\sigma }_{\lambda }}^2$$ (2)

where μ_t−1 is the variance of log wealth in the parental generation. We then solve for μ, the steady-state (stationary, or long run) variance of log wealth, by setting μ_t−1 = μ_t =μ giving:

$$var(w_{\text{i}})\equiv \mu ={{\sigma }_{\lambda }}^2/(1-{\beta }^2).$$ (3)

The steady-state level of wealth inequality may be interpreted as the effect of stochastic shocks (the numerator), blown up by the intergenerational transmission multiplier, (1−β²)⁻¹, which is increasing in β, the extent of intergenerational transmission of wealth. As β approaches one, the effects of windfalls of wealth, accidents of health, theft, and the like, dissipate more slowly over time so that the shocks of even the distant past contribute to inequality in a given generation, resulting in high levels of steady-state inequality. For β exceeding one there is no steady state and inequality will increase over time. Figure 2 shows the determination of steady-state inequality by equations (2) and (3).

Figure 2. Steady-state wealth distribution.

The dashed line is the steady-state condition requiring wealth inequality to be unchanging from one period to the next. The solid line (equation 2) is the combined effect of this period’s variance of shocks (the constant) augmented by the inequalities in wealth transmitted from the previous period (the slope).

A population exposed to greater wealth shocks is represented by a larger intercept on the vertical axis (σ_λ²) while greater intergenerational transmission of wealth is represented by a steeper solid line (the slope of which is β², see equation 2). To use this model we need not assume that the steady-state wealth distribution is typically attained. What is important for our approach is that for a given society the fluctuations around the steady-state value are small and random relative to the differences in steady state inequality across societies characterized by different economic systems and different kinds of wealth.

By a household’s wealth we mean any of its attributes that contribute to its well-being as measured by consumption levels, social status, or other ends that are valued in the particular society. To take account of many kinds of wealth simultaneously we define the importance of each class of wealth as follows. Let E, M, and R be positive numbers representing the amount of a household’s embodied, material and relational wealth. The well-being of the household, W, is a weighted product of these classes of wealth, the weights being the relative importance of each wealth class in the economic system in which the household lives:

$$W=\gamma E^{\text{e}}{M}^{\text{m}}{R}^{\text{r}}$$ (4)

where γ is a positive constant and the exponents e, m, and r (the weights) are the derivatives of the logarithm of well-being with respect to the logarithms of the three respective wealth classes, or equivalently the percent difference in well-being associated with a one percent difference in the amount of each class of wealth. The weighted product is preferred (to the weighted sum, for example) because it implies, plausibly, that the wealth classes are complements, that is, the contribution of each class of wealth to individual well-being is enhanced by the extent of the other classes of wealth.

We assume constant returns to scale (doubling the amount of all three classes of wealth of a household will double its well-being) implying that e + m + r = 1. This motivates our interpretation of these exponents as weights indicating the relative importance of each class of wealth. We refer to these weights as α = {e, m, r}. To combine this information on the importance of wealth classes with our measures of the extent of transmission of each wealth class across generations, we estimate an α-weighted average β for each economic system. We also calculate an α-weighted average measure of wealth inequality (the Gini coefficient) for each economic system (see below).

Ideally one would have comparable measures of the relative importance (α) and degree of transmission of each class of wealth (β), the degree of inequality in the distribution of each kind of wealth (Gini), and the extent of wealth shocks (σ_λ²). Measuring the latter is difficult in any economy and impossible in the economies under study, as the estimate requires long time-series data for individual wealth, which with few exceptions are simply non-existent. We are able, however, to measure the other three quantities, and this permits us to gauge the extent to which intergenerational wealth transmission allows the effect of shocks to accumulate over time, and to explore differences in both intergenerational wealth transmission and wealth inequality across economic systems and wealth classes.

The nature of wealth and the varieties of economic systems

Since the development of human capital theory a half-century ago, it has been conventional to treat wealth as a multi-dimensional attribute, as evidenced by the adjectives now routinely applied to the word “capital,” namely, social, somatic, material, cultural and network (11–13). We identified three broad classes of wealth in our populations, namely, embodied (body weight, grip strength, practical skills, and in pre-demographic transition populations, reproductive success), material (land, livestock and household goods), and relational (social ties in food-sharing networks and other forms of assistance). We have no measures of other heritable determinants of well-being such as ritual knowledge, an important source of institutionalized inequality in some populations. By linking the level of wealth of parents and adult offspring, measured as appropriate for individuals (e.g. body weight) or households (e.g. land), we are able to estimate the degree of intergenerational persistence for particular types of wealth, and then to create averages for each broad class of wealth.

We classify economic systems according to the conventions of anthropology (14). Hunter-gatherer economic systems are those that make minimal use of domesticated species (either plant or animal), whereas pastoralists rely heavily though rarely exclusively on livestock kept for subsistence and sometimes commercial purposes. While both horticulturalists and agriculturalists use domesticated plants and animals, horticulturalists do not typically use ploughs, their cultivation is labor- not land-limited, and land markets are absent or limited. As with all classificatory systems there are some ambiguities of assignment of our populations to these classes, but the least improbable reclassifications do not affect our results (see (9), section 4).

Transmission of wealth across generations need not take the form of bequests, or the literal passing on of physical objects (such as when land is transmitted from father to son). What matters for the long-run dynamics of inequality is anything that results in a statistical association between the wealth of parents and children. This statistical association may be enhanced by positive assortment in mating or in economic pursuits as occurs when skilled hunters pursue prey together, or when successful herders cooperate in livestock management. The same is true of increasing returns or other forms of positive feedbacks, for example when those who invest a substantial amount earn higher than average returns, or when childhood developmental effects associated with modest genotypic differences result in substantial phenotypic differences. Negative feedbacks such as sharing norms that extract substantial transfers from the wealthy, or wealth shocks that are inversely correlated with one’s wealth (such as occur when cattle thieves target large herds), by contrast, heighten regression to the mean by reducing β, thereby attenuating the persistence of inequality over time and hence reducing steady-state inequality.

Our three wealth classes differ in the extent to which these transmission mechanisms – transfers, assortment, and positive feedbacks in development or accumulation – are at work. Material wealth is readily transferred to the next generation by bequests sanctioned by cultural rules. Moreover, because it is typically observable, material wealth can facilitate deliberate marital or economic assortment. For some types of material wealth (storage facilities, defense of herds, and irrigated land, for example) the correlation of material wealth levels across generations is further enhanced by the presence of increasing returns to scale or other positive feedbacks. Network ties can easily be passed from parent to child, but the offspring of less well-connected parents can usually gain access to allies and helpers more readily than a landless son in a farming community can acquire land, for example through savings or systems of patronage. As a result we expect the intergenerational transmission of relational wealth to be quite limited, at least by comparison with material wealth.

Embodied wealth is transmitted by a combination of genetic inheritance, deliberate socialization, and parent-offspring similarity in the conditions affecting childhood development. The knowledge component of embodied wealth is readily transmitted to offspring, but unless restricted by religious or other constraints it is typically available to other members of a population as well (the common knowledge of the behavior of prey species, for example, or farming practices). Genetic and psychometric evidence from industrial societies suggests that parent-offspring transmission of economically relevant personality and behavioral characteristics such as risk-taking, trustworthiness, conscientiousness, and extroversion is quite limited (9). We do not have similar evidence across generations in the small-scale populations under study, but industrial-society estimates support our expectation that the degree of intergenerational transmission will differ markedly among our three wealth classes, with substantial transmission of material wealth and more limited transmission of relational and embodied wealth.

Ethnographic evidence suggests that the four economic systems also differ in the importance of the three classes of wealth. A successful hunter-gatherer or horticulturalist depends heavily on his or her strength, practical knowledge and social networks while making little use of material resources that are not in the public domain. By contrast the well-being of a herder or farmer is closely tied to the amount of stock or land under his or her command, making material wealth a more important influence on livelihoods in these economic systems.

Estimating the intergenerational transmission of wealth

To estimate our model of wealth transmission we need two pieces of information: the degree of intergenerational transmission (β) for each wealth type, and the importance of each wealth class in a given economic system (α ≡ {e, m, r}). Note that we do not require identification of the causal paths by which transmission takes place, as might be represented in a multi-equation structural model (15). Our model instead requires a single estimate of the magnitude of the statistical association between parental and offspring wealth (β) for each data set. This requirement, along with the absence of robust evidence of non-linearities, motivated our consistent use of linear models. Functional forms, estimation procedures, robustness checks, weighting procedures and other aspects of our statistical techniques and results are described in (9), section 1. Note that the populations studied were not selected at random; instead, we included all populations we were aware of for which intergenerational wealth transmission estimates are feasible and the researchers agreed to share data.

Table 1 presents our individual estimates of β while Table 2, below, presents the summary statistics for both the intergenerational transmission (β) and the importance of the three wealth classes in the four economic systems (α).

Table 2.

Summary statistics: Intergenerational transmission of wealth (β), the importance of wealth classes (α), and inequality (Gini) by economic system.

		Wealth Classes
Economic Systems		Embodied	Relational	Material	α-Weighted Average of βs	α-Weighted Average of Ginis
Hunter-Gatherer	α	0.46	0.39	0.15
	β	0.16	0.23	0.17	0.19	0.25	Gini
	SE(β)	(0.06)	(0.11)	(0.011)	(0.05)	(0.04)	SE(Gini)
	P	0.01	0.04	0.12	0.00	0.00	P
Horticultural	α	0.53	0.26	0.21
	β	0.17	0.26	0.09	0.18	0.27	Gini
	SE(β)	(0.05)	(0.11)	(0.09)	(0.04)	(0.03)	SE(Gini)
	P	0.00	0.02	0.31	0.00	0.00	P
Pastoral	α	0.26	0.14	0.61
	β	0.07	na	0.67	0.43†	0.42†	Gini
	SE(β)	(0.15)	na	(0.07)	(0.06)	(0.05)	SE(Gini)
	P	0.66	na	0.00	0.00	0.00	P
Agricultural	α	0.27	0.14	0.59
	β	0.10	0.08	0.55	0.36	0.48	Gini
	SE(β)	(0.07)	(0.11)	(0.07)	(0.05)	(0.04)	SE(Gini)
	P	0.16	0.47	0.00	0.00	0.00	P
Average across all economic systems	α	0.38	0.23	0.39
	β	0.12	0.19	0.37	0.29	0.35	Gini
	SE(β)	(0.05)	(0.06)	(0.04)	(0.03)	(0.02)	SE(Gini)
	P	0.01	0.00	0.00	0.00	0.00	P

Notes: Cell-means were estimated in a regression against a full set of dummy variables for each cell, with conventional standard errors. See (9), section 1, for a discussion of alternative approaches to estimating these cell-means and their standard errors, and Tables S11 and S12 for the alternative results. Reported P-values correspond to two-tailed tests of the hypothesis that the true β or Gini coefficient is zero for that cell. Averages across wealth classes (final two columns) are calculated after weighting the cell-mean βs and Ginis by the values of α shown.

^†The elasticity and Gini for Kipsigis cattle partners (see Tables 1 and S4) are used in the Pastoral/Relational cell for the calculation of the α-weighted average across wealth classes.

Across the four economic systems, the estimated β for 14 measures of material wealth, including agricultural and horticultural land, livestock, shares in sea-mammal-hunting boats, quality of housing and household utensils averages 0.37 (Table 2). For farm land (5 data points) the degree of transmission is substantial, averaging 0.45 (calculated from the data in Table 1), thus equaling or exceeding the intergenerational transmission of most forms of wealth in modern industrial economies (16). Livestock are even more highly transmitted across generations (Table 1, βs averaging 0.66).

Our 23 estimates of the transmission of embodied wealth across generations average 0.12. The highest estimates are for body weight (for which β averages 0.37). We also find a very modest level of intergenerational transmission of reproductive success (RS or number of offspring surviving to age 5); it is entirely absent in three societies, has a maximum value of 0.21, and averages 0.09, similar to low correlations between parental and offspring fertility in many pre-demographic transition populations (17). Grip strength shows low transmissibility across generations. The transmission of hunting success is highly variable (0.08 for the Ache, 0.38 for the horticultural Tsimane, and 0.05 for hunting and foraging yields in the Hadza), averaging 0.17. Knowledge and skill, such as the production and management of horticultural crops in the Pimbwe or proficiency in subsistence tasks and cultural knowledge in the Tsimane, are only weakly transmitted from parents to offspring.

The six estimates of relational wealth transmission indicate that while network links are transmitted across generations, the extent is modest, averaging β = 0.19.

To measure the importance of each wealth class in the four economic systems (α) we used ethnographers’ judgments (for each wealth class in the population they studied) of the percentage difference in household well-being associated with a one percent difference in the amount of a given wealth class, holding other wealth classes constant at the average for that population, and requiring these percentage effects to sum to one. The average values of α by wealth class and economic system also appear in Table 2. Consistent with descriptive ethnographies of these and other populations, embodied and relational wealth are relatively important for hunter-gatherers while material wealth is key in pastoral and agricultural populations.

Statistical estimates of the importance of each class of wealth across the economic systems (α) would have been preferable, but are precluded by the absence for most populations of a single relatively homogeneous measure of well-being. However we were able to econometrically estimate m – the importance of material wealth – from an equation similar to (4) using data (most of it from half a century ago) from populations not represented in our study, including one horticultural, two pastoral and seven small-scale agricultural economies. These estimates (see (9) section 1) are close to our ethnographers’ estimates, and suggest that, if anything, we have understated the difference in the importance of material wealth between pastoral and agricultural economies, on the one hand, and horticultural economies on the other. Correcting this understatement would only strengthen our main conclusions.

Results

Our first finding is that the α-weighted averages of the βs (the importance-weighted average transmission coefficients) for the four economic systems differ markedly (Table 2). Intergenerational transmission of wealth is modest in hunter-gatherer and horticultural systems and quite substantial in agricultural and pastoral systems. However, even the smaller βs of the former imply that being born into the top ten percent of the wealth distribution confers quite significant advantages. In these societies, a child of parents in the highest wealth decile is on average more than three times as likely to end up in the top decile as is the child of the bottom decile ((9), section 3 and Table S7). While hardly a level playing field, intergenerational transmission in these economic systems is modest when compared to the agricultural systems, where the child of the top decile is on average about 11 times more likely than the child of the poorest decile to end up in the richest decile, or to the pastoral systems, where the ratio exceeds 20.

Our second finding is that economic systems in which wealth is more heritable are indeed more unequal, as predicted by our model. For each population and type of wealth we estimated the Gini coefficient, which is a measure of inequality ranging from 0 (equal wealth) to approximately 1 (all wealth held by a single household, see Table S4 and discussion in (9), section 1). To calculate an overall measure of wealth inequality for a given economic system we again weight the results for each wealth class in that system by its importance (α). These estimates of overall wealth inequality appear in the last column of Table 2, and in more detail in Table S5. They exhibit the same pattern as the transmission coefficients (βs): hunter-gatherer and horticultural populations are both quite egalitarian, while pastoral and agricultural societies are characterized by substantial wealth inequality (see also Figure S2).

A third finding is that neither the overall intergenerational transmission of wealth nor the level of inequality is greater in horticultural than in hunter-gatherer populations. This result challenges a long-standing view (18) that foragers are uniquely egalitarian among human societies. Thus it may be ownership rights in land and livestock, rather than the use of domesticated plants and animals per se, that are key to sustaining high levels of inequality. Our finding that pastoralists transmit wealth across generations to an extent equal to if not greater than farmers, and likewise display similar Gini coefficients, will also challenge widely-held views that herders are relatively egalitarian (19).

Is the relative intergenerational mobility of the hunter-gatherer and horticultural systems and the high levels of intergenerational wealth transmission of the pastoral and agricultural systems due primarily to technology (the differing importance of the distinct classes of wealth across economic systems) or to institutions (differences in intergenerational transmission, independent of differences in the importance of the wealth classes)? To answer this question, we take advantage of the fact that both the importance of the wealth classes and degree of intergenerational transmission of wealth are similar in the hunter-gatherer and horticultural populations, on the one hand, and the pastoral and agricultural populations on the other. This allows us to reduce the four systems to two. Forty-five percent of the large (namely 0.21) and statistically significant difference (p<0.001) between the average α-weighted βs of these two groups of economic systems is accounted for by differences in technology, reflected primarily in the greater importance of material wealth in producing the herders’ and farmers’ livelihoods (for the decomposition formula, see (9) section 1; for the paired economic systems results, see Table S3). The remaining 55 percent is due to differences in institutions, reflected primarily in the lesser degree of transmission of material wealth in the horticultural and hunter-gather populations. While differences across economic systems in both the importance of the wealth classes and in the heritability of a given class of wealth are relevant, the latter are somewhat more strongly associated with differences in the extent of wealth transmission across generations, and hence the generation of inequality. This is our fourth finding.

Note that for the intergenerational transmission of wealth, the effects of technology and institutions are complementary rather than simply additive. Econometric analysis (Table S13, equation 2) shows that this joint (super-additive) effect of material wealth and agricultural or pastoral economic systems in the intergenerational transmission of wealth is statistically robust even when using a fixed-effects regression to control for all unobserved population-level characteristics (such as the distinct inheritance and marital systems and other institutional structures of the populations).

Not surprisingly in light of our fourth finding, additional econometric analysis (described in section 5 of (9)) shows that both wealth class and economic system significantly and independently predict the level of wealth inequality: material wealth types, and pastoral and agricultural societies, display higher Gini coefficients (Table S13, equation 3). Moreover, the greater inequality in material wealth is robust to the inclusion of fixed effects to control for unobservable population-level variation (Table S13, equation 4).

A final finding is that, in the populations studied, the more important forms of wealth are more highly transmitted across generations: the simple correlation between the 43 βs listed in Table 1 and the corresponding population and wealth-class specific αs listed in Table S1 is 0.48 (p=0.001). This is consistent with the view that the extent of transmission of a given type of wealth is affected by individual decisions, and that parents differentially transmit to their offspring the forms of wealth that are most important in that society (20). This is most striking in the case of material wealth. In pastoral and agricultural societies its average importance (α) is 0.60 and the average transmission coefficient (β) is 0.61, while in hunter-gatherer and horticultural populations the values respectively are 0.18 and 0.13 (calculated from Table 2, see Tables S2 and S4). Similarly, the less important forms of wealth in agricultural and pastoral systems (embodied and relational wealth) display significantly lower βs.

We implemented two robustness checks to make sure, first, that our results are not driven merely by the qualitative estimates of α provided by the ethnographers and, second, that these estimates are themselves plausible. The first is the above decomposition of the effects of economic system and wealth class, which shows that a substantial difference (more than half of that estimated) between economic systems in aggregate wealth transmission across generations would exist even under the unrealistic assumption that the importance of the wealth classes does not differ across economic systems. The second check is provided by our econometric estimates of the importance of material wealth mentioned above. Note that differences between the estimates of the importance of the two non-material types of wealth (e and r) are modest, and that e + m + r = 1, so we may group embodied and relational wealth, whose importance we measure by 1− m*, where m* is the average of our econometrically estimated coefficients for material wealth in pastoral (0.84), agricultural (0.57) and horticultural (0.23) production. (We use the latter figure also for hunter-gatherers and in light of their evident similarity with horticulturalists.) Using these weights rather than those estimated by the ethnographers gives results similar to Table 2 ((9) section 5), but with even greater differences in the intergenerational transmission of wealth between the agricultural and pastoral economies, on the one hand, and the hunter-gatherer and horticultural economies, on the other.

Discussion

Our principal conclusion is that there exist substantial differences among economic systems in the intergenerational transmission of wealth, and that these arise because material wealth is more important in agricultural and pastoral societies, and because in these systems material wealth is substantially more heritable than embodied and relational wealth. By way of comparison, the degree of intergenerational transmission of wealth in hunter-gatherer and horticultural populations is comparable to the intergenerational transmission of earnings in the Nordic social democratic countries (4) – the average β for earnings in Denmark, Sweden, and Norway is 0.18 – while the agricultural and pastoral societies in our data set are comparable to economies in which inequalities are inherited most strongly across generations, the U.S. and Italy, where the average β for earnings is 0.43 Concerning wealth inequality, the Gini measure in the hunter-gatherer and horticultural populations is almost exactly the average of the Gini measure of disposable income for Denmark, Norway and Finland (0.24) while the pastoral and agricultural populations are substantially more unequal than the most unequal of the high income nations, the U.S., whose Gini coefficient is 0.37 (21).

Our model explains some seeming anomalies, such as substantial wealth differences in those hunter-gatherer populations whose rich fishing sites can be defended by families or other corporate groups and transmitted across generations, and which constitute an atypically important form of material wealth for those societies (22). Our findings also provide evidence for the view – widely held among historians, archaeologists and other social scientists – that some influences on inequality are not captured simply by differences in technology, as measured by our αs. For example, the marked hierarchies among some Australian foragers may be due to polygyny (23), elite possession of ritual knowledge (24) that may be transmitted intergenerationally, or even to the dynamics of food sharing (25). Similarly, the fact that some agricultural and pastoral societies do not exhibit substantial levels of economic inequality despite their characteristic forms of wealth being in principle heritable (26, 27) suggests the importance of deliberate egalitarianism, and other cultural influences and political choices (28). Examples include the lavish funeral feasting that redistributes the wealth of the elite among the Tandroy and other cattle pastoralists in Madagascar (29) and elsewhere (26). Other examples are the Nordic social democratic polities mentioned above.

One may speculate on the basis of these results that the current trend towards a knowledge-based economy that is less reliant on material wealth and more reliant on embodied and relational wealth might in the long run be associated with a concomitant reduction in intergenerational wealth transmission. But the importance in our data set of economic systems per se as a determinant of the dynamics of inequality suggests that the implications for inequality of this shift in how humans make a living will depend critically on our institutions.