It's long been known that one of the greatest predictors of wealth and prosperity is what kind of family you're born into. But what hasn't been as clear is whether it's genetic or environmental factors determining these outcomes. A new paper co-authored by a UT researcher dives into the ongoing debate on nature versus nurture and how it affects wealth in a child’s future.
Researchers have known for a long time that having rich parents is the biggest predictor of whether a kid will grow up to be wealthy, too. They just weren’t exactly sure why.
“What we didn’t know is how much of it was the effect of pre-birth factors, like genetics, and how much of it is just environment,” says Kaveh Majlesi, an economics professor at Lund University in Sweden who co-authored a new paper looking at how much genetics and environment respectively matter in determining wealth later in life. University of Texas economics professor Sandra Black is also a co-author on the paper. Black is currently serving on the White House Council of Economic Advisers in Washington.*
Since the children of wealthy people have both their genetics and environment, the authors needed a different sample to work with. So, the paper looked at adopted children in Sweden born in the fifties, sixties and seventies to find an answer. That way they could control for both environment and genetics to see which was more important.
“Around two-thirds of the relationship between parents and children can be explained by the environment,” he says. “And one-third by pre-birth factors.”
The paper found that environment — the nurture — was significantly more important than genetics — the nature — in determining eventual wealth. And that was before the parents of the children being studied had died and passed on an inheritance – subjects were required to have at least one parent alive. But, the subjects were old enough – with average ages of 44 for biological subjects and 43 for their adopted counterparts – to accumulate their own wealth.
Majlesi says that would make environment an even bigger factor. It’s not that rich kids are more talented or smarter, the paper found, it’s that they’re lucky to be born into wealth in the first place.
“For some people, it seems obvious…of course you’re going to be rich if you grow up with wealthy parents,” Majlesi says. “I think what’s missing here is that everyone kind of knew that environment matters, but they didn’t know how much it matters. So, I think that an important part of this paper is just quantifying the rule of nature versus nurture and how much each component matters.”
Majlesi also notes that if the study found such strong environmental factors in a country like Sweden, with its robust social welfare systems, then in other countries with less of a safety net, it's likely environment could account for even more influence in the accumulation of wealth.
*Correction: This story has been updated to clarify that Sandra Black is retaining her position at UT while serving on the White House Council of Economic Advisers.