Intergenerational Housing Transfers and the Spatial Misallocation of Talent: A Geography of Missed Opportunities

• In Event: Economic Shocks and Retirement Choices

Abstract

This paper shows that tax-incentivized intergenerational housing transfers create spatial misallocation of talent, lowering aggregate productivity. Wealthy but less productive heirs retain prime real estate in high-productivity cities, crowding out more talented but liquidity-constrained individuals. Using a new micro-dataset of all housing transactions in France (2011–2022)—including sales, inheritances, and inter vivos gifts—we document three findings. First, about one-third of transfers occur within families. Second, favorable tax treatment for inheritances and gifts extends homeownership durations, reducing housing turnover, especially in high-productivity areas. This effect is not unique to France and parallels features in other systems (e.g., the U.S. “step-up in basis” or California’s Proposition 13). Exploiting France’s property-right splitting system (démembrement), we measure how owners value prolonged tenure at tax notches. Third, we build a spatial model quantifying the productivity costs of these distortions: misallocation arises when heirs inherit location advantages without comparable talent, displacing higher-skill migrants from poorer backgrounds.

Authors

• Wouter Leenders, UC Berkeley

• Bluebery Planterose, Paris School of Economics