Intergenerational Impact of Financial Reparations: Evidence from Holocaust Survivors

This study examines how Holocaust reparations affected intergenerational
mobility in Israel. Using linked administrative data on survivors and their children,
I compare recipients of Germany's BEG and Israel's MOF programs. Both applied
similar eligibility rules but differed sharply in generosity. Eligibility for BEG was
determined primarily by passing an affiliation test confirming membership in the
German cultural group. The Holocaust itself weakened the usual correlation
between ability and outcomes, creating a credible setting to identify the causal
role of financial resources in shaping long-term mobility.
BEG recipients achieved higher household income (including the reparation
payments) and lived in more affluent neighborhoods, advantages that extended
to their children through higher educational attainment and greater upward
mobility. A calibrated BeckerTomes model supports these findings, showing
that mobility responds strongly to initial endowments and that transfer effects
depend on exposure intensity. These results imply that reparations generated
meaningful intergenerational effects and can serve as effective policy instruments
for compensating historically disadvantaged or harmed populations. At the same
time, they underscore the importance of interpreting IGM estimates in light of
historical shocks and compositional differences.