Erik Lindqvist och Robert Östling

A large body of scientific research has shown that people who are financially well off are, on average, both happier and live longer than those who struggle to make ends meet. The relationship also extends to the next generation: children of wealthy parents, for example, tend to perform better at school and enjoy better health.

Previous research has also shown that wealthier individuals earn higher returns on invested capital. This means that wealth can create a self-reinforcing virtuous cycle: greater wealth can lead to better health, higher levels of education and higher financial returns, all of which are themselves important conditions for future economic success. Conversely, poverty may create corresponding vicious cycles. Severe debt, for example, can make it more difficult for parents to give their children a good start in life.

In this project, the research team plans to study these self-reinforcing processes of wealth accumulation empirically. One challenge is distinguishing cause from effect, as the two are closely intertwined. The researchers will address this challenge by using random variation in wealth that is unrelated to individuals’ previous wealth or other outcomes.