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"Wealth distribution"
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Earnings Inequality and Other Determinants of Wealth Inequality
We study the relation between the distribution of labor earnings and the distribution of wealth. We show, theoretically as well as empirically, that while labor earnings and precautionary savings are important determinants of wealth inequality factors, they cannot by themselves account for the thick tail of (the large top shares in) the observed distribution of wealth. Other determinants, like stochastic returns to wealth, as well as savings rates and rates of returns increasing in wealth, need to be accounted for.
Journal Article
Level and Distribution of Global Household Wealth
The level of average household wealth in all countries is estimated via the determinants of assets and debts for 39 countries which have balance sheet or survey data. The distribution of wealth in all countries is inferred from information on the pattern of wealth ownership for 20 countries (covering 59% of world population). Combining the level and distribution figures suggests that median global wealth was PPP$8,635 in the year 2000, and that PPP$518,361 was needed to belong to the top percentile. The top decile owned 71% of world wealth and the global Gini value was 0.802.
Journal Article
The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents
We study the dynamics of the distribution of wealth in an overlapping generation economy with finitely lived agents and intergenerational transmission of wealth. Financial markets are incomplete, exposing agents to both labor and capital income risk. We show that the stationary wealth distribution is a Pareto distribution in the right tail and that it is capital income risk, rather than labor income, that drives the properties of the right tail of the wealth distribution. We also study analytically the dependence of the distribution of wealth—of wealth inequality in particular—on various fiscal policy instruments like capital income taxes and estate taxes, and on different degrees of social mobility. We show that capital income and estate taxes can significantly reduce wealth inequality, as do institutions favoring social mobility. Finally, we calibrate the economy to match the Lorenz curve of the wealth distribution of the U.S. economy.
Journal Article
The Distribution of Wealth and the MPC: Implications of New European Data
Using a standard, realistically calibrated model of buffer-stock saving with transitory and permanent income shocks, we study how cross-country differences in the wealth distribution and household income dynamics affect the marginal propensity to consume out of transitory shocks (MPC). Across the 15 countries in our sample, we find that the aggregate consumption response ranges between 0.1 and 0.4 and is stronger (i) in economies with large wealth inequality, where a larger proportion of households has little wealth, (ii) under larger transitory income shocks, and (iii) when we consider households only use liquid assets (rather than net wealth) to smooth consumption.
Journal Article
Entrepreneurship, Frictions, and Wealth
This paper constructs and calibrates a parsimonious model of occupational choice that allows for entrepreneurial entry, exit, and investment decisions in the presence of borrowing constraints. The model fits very well a number of empirical observations, including the observed wealth distribution for entrepreneurs and workers. At the aggregate level, more restrictive borrowing constraints generate less wealth concentration and reduce average firm size, aggregate capital, and the fraction of entrepreneurs. Voluntary bequests allow some high‐ability workers to establish or enlarge an entrepreneurial activity. With accidental bequests only, there would be fewer very large firms and less aggregate capital and wealth concentration.
Journal Article