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This paper critiques the notion that unfettered inequality is an inevitable consequence of contemporary capitalism, and provides an alternative, new framework for analyzing changes in income and wealth distribution. By thinking of these distributions as the result of changing centrifugal and centripetal economic and political forces, we can identify changes in our economic and social structure that may have played a central role in the creation of today's high level of inequality, and we can analyze the potential impacts of alternative policies. Specifically, I suggest that much of the increase in inequality is associated with the growth in rents — including land and exploitation rents (e.g., arising from monopoly power and political influence).

The paper analyzes the fiscal effects of a Swiss-type tax on household wealth, with a $120,000 exemption and marginal tax rates running from 0.05 to 0.3 percent on $2.4 million or more of wealth. It also considers a wealth tax proposed by Senator Elizabeth Warren with a $50 million exemption, a 2 percent tax on wealth above that and a 1 percent surcharge on wealth above $1 billion. Based on the 2016 Survey of Consumer Finances, the Swiss tax would yield $189.3 billion and the Warren tax $303.4 billion. Only 0.07 percent of households would pay the Warren tax, compared to 44.3 percent for the Swiss tax. The Swiss tax would have a very small effect on income inequality, lowering the post-tax Gini coefficient by 0.004 Gini points. The effect of the Swiss tax and Warren tax on wealth inequality is miniscule, lowering the Gini coefficient by at most 0.0005 Gini points.

Extreme wealth inequality imposes significant constraints on financially vulnerable families, especially on the development of children in those families. Child Development Accounts (CDAs)—investment accounts offering financial access, subsidies, and incentives to provide assets for children—are designed to reduce wealth inequality over time and promote human development. We review existing evidence from a test of a CDA policy in a population sample. Findings show that, in addition to stimulating account holding and asset building, universal and automatic CDAs for postsecondary education have positive effects on outlooks for and behaviors of parents and children. This long-running CDA experiment suggests ten design elements for a universal, progressive, and potentially lifelong CDA policy. Informed by findings from this experiment, seven states have adopted some version of this model. These innovations illustrate potential policy pathways to reducing asset inequality and improving child development.

We provide a systematic analysis of the properties of individual returns to wealth using 12 years of population data from Norway’s administrative tax records. We document a number of novel results. First, individuals earn markedly different average returns on their net worth (a standard deviation of 22.1%) and on its components. Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within narrow asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the net worth distribution increases the return by 18 percentage points (and 10 percentage points if looking at net-of-tax returns). Fourth, individual wealth returns exhibit substantial persistence over time. We argue that while this persistence partly arises from stable differences in risk exposure and assets scale, it also reflects heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.

This paper provides an overview of different inheritance tax regimes in selected European countries and the United States. We show that in the majority of countries the tax rate is related to the relationship between testator and the beneficiary as well as the value of the inherited assets. In most countries the transfer ofwealth within families is treated preferentially (lower tax rates, tax exemptions and reliefs). This is particularly the case for business assets and family homes. The analysis further discusses the features and effects of inheritance tax regimes, which include behavioural responses of individuals and different distributional effects of an inheritance tax. Although the actual revenues of inheritance taxation are quite low in the selected countries, some indicators point to higher revenue potentials in the future. An appropriate design for inheritance taxation could further help to decelerate the increase in wealth inequality.

The family is a key institution that transmits inequality, and racial and socioeconomic inequalities in family life have grown markedly. We use data from the 1996 to 2008 panels of the Survey of Income and Program Participation to offer a comprehensive account of how wealth relates to family stability and how that relationship varies by union type, age cohort, and both type and amount of wealth. We find that liquid and illiquid assets and secured debts are associated with a decrease in the likelihood of dissolution, and that large unsecured debts are associated with an increase. These associations do not differ significantly for married and cohabiting couples. We find evidence of both the material and the symbolic importance of wealth for stability. We also find that wealth explains a significant degree of the racial inequality in family stability.

This paper studies inequality in America through the lens of distributional macroeconomic accounts—comprehensive distributions of the aggregate amount of income and wealth recorded in the official macroeconomic accounts of the United States. We use these distributional macroeconomic accounts to quantify the rise of income and wealth concentration since the late 1970s, the change in tax progressivity, and the direct redistributive effects of government intervention in the economy. Between 1978 and 2018, the share of pre-tax income earned by the top 1 percent rose from 10 percent to about 19 percent, and the share of wealth owned by the top 0.1 percent rose from 7 percent to about 18 percent. In 2018, the tax system was regressive at the top-end; the top 400 wealthiest Americans paid a lower average tax rate than the macroeconomic tax rate of 29 percent. We confront our methods and findings with those of other studies, pinpoint the areas where more research is needed, and describe how additional data collection could improve inequality measurement.

Although the Scandinavian countries are often considered to epitomize social democratic governance, Scandinavia’s profound wealth inequalities, seen in relation to the more modest income differences, constitutes a fascinating paradox. Drawing on class theoretical concerns with strategies for reproduction and a Bourdieusian emphasis on class fractions, we explore how class-origin wealth gaps evolved over the past 25 years in Norway, and how they compare to class-origin income gaps. First, we find that class-origin wealth gaps have increased in recent years, whereas income inequalities are fairly persistent among men, and increasing among women. We find that educational attainment is important for channeling income inequality, but that education is less important for understanding wealth gaps. Second, we document differences between people whose family contexts were most highly endowed with economic capital and those who grew up in families that were engaged in cultural fields or the professions. Finally, we highlight how analyses based solely on net worth neglect important ways class origin perpetuates and accelerates wealth inequalities via the acquisition of debt. We argue that recent decades have fostered new instruments for opportunity hoarding that are most successfully used by the sons and daughters of the economic upper class.

This paper studies the contribution of both labor and non-labor income in the growth in income inequality in the United States and large European economies. The paper first shows that the capital to labor income ratio disproportionately increased among high-earnings individuals, further contributing to the growth in overall income inequality. That said, the magnitude of this effect is modest, and the predominant driver of the growth in income inequality in recent decades is the growth in labor earnings inequality. Far more important than the distinction between total income and labor income, is the way in which educational factors account for the growth in US labor and capital income inequality. Growing income gaps among different education groups as well as composition effects linked to a growing fraction of highly educated workers have been driving these effects, with a noticeable role of occupational and locational factors for women. Findings for large European economies indicate that inequality has been growing fast in Germany, Italy, and the United Kingdom, though not in France. Capital income and education don't play as much as a role in these countries as in the United States.

This paper analyzes the extent to which health shocks play a role in black-white wealth inequality. Deploying data from the Panel Study of Income Dynamics, we implement a first-differences identification strategy in estimating the effects of acute health events on changes in wealth for couples across waves of data from 1999 to 2011. We find that although such shocks affect both white and black families, they make black families more vulnerable financially as family heads near retirement. In comparison with their white counterparts, black families that experience an acute health shock are more likely to rely on social safety nets, such as food stamps and Social Security Disability Insurance. Findings hold implications across multiple policy arenas, including health-care and labor law.