scholarly journals Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France

2020 ◽  
Author(s):  
Bertrand Garbinti ◽  
Jonathan Goupille-Lebret ◽  
Thomas Piketty
Keyword(s):  
Wealth Distribution ◽  
Asset Price ◽  
House Price ◽  
Wealth Inequality ◽  
National Accounts ◽  
Labor Earnings ◽  
Wealth Concentration ◽  
Simple Simulation ◽  
Steady State Levels ◽  
Savings Rates

Abstract Measuring and understanding the evolution of wealth inequality is a key challenge for researchers, policy makers, and the general public. This paper breaks new ground on this topic by presenting a new method to estimate and study wealth inequality. This method combines fiscal data with household surveys and national accounts in order to provide annual wealth distribution series, with detailed breakdowns by percentiles, age, and assets. Using the case of France as an illustration, we show that the resulting series can be used to better analyze the evolution and the determinants of wealth-inequality dynamics over the 1970–2014 period. We show that the decline in wealth inequality ends in the early 1980s, marking the beginning of a rise in the top 1% wealth share, though with significant fluctuations due largely to asset price movements. Rising inequality in savings rates coupled with highly stratified rates of returns has led to rising wealth concentration in spite of the opposing effect of house price increases. We develop a simple simulation model highlighting how changes in the combination of unequal savings rates, rates of return, and labor earnings that occurred in the early 1980s generated large multiplicative effects that led to radically different steady-state levels of wealth inequality. Taking advantage of the joint distribution of income and wealth, we show that top wealth holders are almost exclusively top capital earners, and increasingly fewer are made up of top labor earners; it has become increasingly difficult in recent decades to access top wealth groups with one's labor income only.

scholarly journals The Role of Credit on the Evolution of Wealth Inequality in the USA

2020 ◽  
Author(s):  
Rodolfo Oviedo Moguel
Keyword(s):  
Wealth Inequality ◽  
Household Wealth ◽  
Borrowing Constraints ◽  
Saving Rate ◽  
Heterogeneous Agent ◽  
Agent Model ◽  
Labor Earnings ◽  
Wealth Concentration ◽  
The Usa

In the USA, the share of household wealth held by the richest 1% increased from 23.5% in 1980 to 41.8% in 2012. This paper contributes to understanding the causes behind this increase. First, using an accounting decomposition, I show that more than half of the increase in the share of the top 1% can be attributed to a decrease in the saving rate of the bottom 99%. Second, using a heterogeneous agent model, I show that the decrease in the saving rate of the bottom groups cannot be rationalized by the reduction in the progressively of taxation or changes in the volatility and concentration of labor earnings. Lastly, I introduce a shock to the credit market into the model in the form of loosening the borrowing constraints of the economy. This shock can simultaneously match the increase in wealth concentration and the decrease of the saving rate of the economy.

scholarly journals Chasing the Tail: A Generalized Pareto Distribution Approach to Estimating Wealth Inequality

2021 ◽  
Author(s):  
Arthur B. Kennickell
Keyword(s):  
Pareto Distribution ◽  
Wealth Distribution ◽  
Estimation Method ◽  
Generalized Pareto Distribution ◽  
Wealth Inequality ◽  
Household Wealth ◽  
National Accounts ◽  
Working Paper ◽  
External Data ◽  
Generalized Pareto

Since the work reported in Vermeulen [2018], a literature has developed on using the simple Pareto distribution along with “rich list” information to make improved estimates of the upper tail of the wealth distribution measured in surveys. Because the construction of such external data is typically opaque and subject to potentially serious measurement error, it may be best not to depend exclusively on this approach. This paper develops an alternative approach, using the generalized Pareto distribution (GPD), of which the simple Pareto is a subset, extending an estimation strategy developed by Castillo and Hadi [1997]. The greater flexibility of the GPD allows the possibility of modeling the tail of the wealth distribution, using a larger set of data for support than is typically the case with the simple Pareto. Moreover, the elaboration of the estimation method presented here allows explicitly for the possibility that the extreme of the observed upper tail is measured with error or that it is not captured at all. The approach also allows the incorporation of external data on total wealth as a constraint on the estimation. For the applications considered here using Austrian and U.S. micro data, the model relies on an estimate of total household wealth from national accounts, rather than rich-list information. The results suggest that where sufficiently comparable and reliable estimates of aggregate wealth are available, this approach can provide a useful way of mitigating problems in comparing distributional estimates across surveys that differ meaningfully in their effective coverage of the upper tail of the wealth distribution. The approach may be particularly useful in the construction of distributional national accounts. (Stone Center on Socio-Economic Inequality Working Paper)

Earnings Inequality and Other Determinants of Wealth Inequality

2017 ◽  
Vol 107 (5) ◽  
pp. 593-597 ◽  
Author(s):  
Jess Benhabib ◽  
Alberto Bisin ◽  
Mi Luo
Keyword(s):  
Wealth Inequality ◽  
Earnings Inequality ◽  
Precautionary Savings ◽  
Distribution Of Wealth ◽  
Labor Earnings ◽  
Stochastic Returns ◽  
Savings Rates

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.

scholarly journals Characterizing Wealth Inequality in Cryptocurrencies

2021 ◽  
Vol 4 ◽  
Author(s):  
Ashish Rajendra Sai ◽  
Jim Buckley ◽  
Andrew Le Gear
Keyword(s):  
Real World ◽  
Free Market ◽  
Wealth Distribution ◽  
Wealth Inequality ◽  
Security Threat ◽  
Economic Context ◽  
Wealth Concentration ◽  
Open Nature ◽  
Analysis Schema ◽  
Insight Into

Cryptocurrencies often tend to maintain a publically accessible ledger of all transactions. This open nature of the transactional ledger allows us to gain macroeconomic insight into the USD 1 Trillion crypto economy. In this paper, we explore the free market-based economy of eight major cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, Dash, Litecoin, ZCash, Dogecoin, and Ethereum Classic. We specifically focus on the aspect of wealth distribution within these cryptocurrencies as understanding wealth concentration allows us to highlight potential information security implications associated with wealth concentration. We also draw a parallel between the crypto economies and real-world economies. To adequately address these two points, we devise a generic econometric analysis schema for cryptocurrencies. Through this schema, we report on two primary econometric measures: Gini value and Nakamoto Index which report on wealth inequality and 51% wealth concentration respectively. Our analysis reports that, despite the heavy emphasis on decentralization in cryptocurrencies, the wealth distribution remains in-line with the real-world economies, with the exception of Dash. We also report that 3 of the observed cryptocurrencies (Dogecoin, ZCash, and Ethereum Classic) violate the honest majority assumption with less than 100 participants controlling over 51% wealth in the ecosystem, potentially indicating a security threat. This suggests that the free-market fundamentalism doctrine may be inadequate in countering wealth inequality within a crypto-economic context: Algorithmically driven free-market implementation of these cryptocurrencies may eventually lead to wealth inequality similar to those observed in real-world economies.

scholarly journals Wealth Disparities Before and After the Great Recession

2013 ◽  
Vol 650 (1) ◽  
pp. 98-123 ◽  
Author(s):  
Fabian T. Pfeffer ◽  
Sheldon Danziger ◽  
Robert F. Schoeni
Keyword(s):  
Great Recession ◽  
Wealth Distribution ◽  
Wealth Inequality ◽  
Longitudinal Analyses ◽  
Minority Status ◽  
Socioeconomic Groups ◽  
The Great Recession ◽  
Before And After ◽  
Substantial Rise ◽  
American Families

The collapse of the labor, housing, and stock markets beginning in 2007 created unprecedented challenges for American families. This study examines disparities in wealth holdings leading up to the Great Recession and during the first years of the recovery. All socioeconomic groups experienced declines in wealth following the recession, with higher wealth families experiencing larger absolute declines. In percentage terms, however, the declines were greater for less advantaged groups as measured by minority status, education, and prerecession income and wealth, leading to a substantial rise in wealth inequality in just a few years. Despite large changes in wealth, longitudinal analyses demonstrate little change in mobility in the ranking of particular families in the wealth distribution. Between 2007 and 2011, one-fourth of American families lost at least 75 percent of their wealth, and more than half of all families lost at least 25 percent of their wealth. Multivariate longitudinal analyses document that these large relative losses were disproportionally concentrated among lower-income, less educated, and minority households.

Natural Limits of Wealth Inequality and the Effectiveness of Tax Policy

2017 ◽  
Vol 47 (1) ◽  
pp. 32-57
Author(s):  
Scott S. Condie ◽  
Richard W. Evans ◽  
Kerk L. Phillips
Keyword(s):  
General Equilibrium ◽  
Income Tax ◽  
Wealth Inequality ◽  
Wealth Accumulation ◽  
Rates Of Return ◽  
Unbalanced Growth ◽  
Wealth Concentration ◽  
Savings Rate ◽  
Wealth Tax ◽  
Growth Differences

This article examines Thomas Piketty’s thesis that there are no natural limits on the accumulation of wealth. We undertake our examination in the context of a simple general equilibrium model with infinitely lived dynasties. We show that extreme wealth accumulation does not happen in general equilibrium unless capital and labor are substitutes, an assumption which also leads to unbalanced growth. We also show that even with unbalanced growth, differences in rates of return and effective labor are not sufficient to cause unbounded inequality. Only permanent savings rate differences can lead to extreme wealth concentration. Finally, we show that while a flat wealth tax will not eliminate extreme wealth concentration, both a graduated wealth tax and a flat income tax will.

scholarly journals Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data *

2016 ◽  
Vol 131 (2) ◽  
pp. 519-578 ◽  
Author(s):  
Emmanuel Saez ◽  
Gabriel Zucman
Keyword(s):  
United States ◽  
Income Tax ◽  
Wealth Inequality ◽  
The United States ◽  
Balance Sheets ◽  
Distribution Of Wealth ◽  
Consumer Finances ◽  
Wealth Concentration ◽  
Top Incomes ◽  
Tax Returns

Abstract This paper combines income tax returns with macroeconomic household balance sheets to estimate the distribution of wealth in the United States since 1913. We estimate wealth by capitalizing the incomes reported by individual taxpayers, accounting for assets that do not generate taxable income. We successfully test our capitalization method in three micro datasets where we can observe both income and wealth: the Survey of Consumer Finance, linked estate and income tax returns, and foundations’ tax records. We find that wealth concentration was high in the beginning of the twentieth century, fell from 1929 to 1978, and has continuously increased since then. The top 0.1% wealth share has risen from 7% in 1978 to 22% in 2012, a level almost as high as in 1929. Top wealth-holders are younger today than in the 1960s and earn a higher fraction of the economy’s labor income. The bottom 90% wealth share first increased up to the mid-1980s and then steadily declined. The increase in wealth inequality in recent decades is due to the upsurge of top incomes combined with an increase in saving rate inequality. We explain how our findings can be reconciled with Survey of Consumer Finances and estate tax data.

scholarly journals Some problems in Piketty: an internal critique

2019 ◽  
pp. 101-118
Author(s):  
Alan Tapper
Keyword(s):  
Income Inequality ◽  
Wealth Distribution ◽  
National Income ◽  
Wealth Inequality ◽  
First Century ◽  
The Other ◽  
Income Ratio ◽  
Twenty First Century ◽  
Distribution Trends

Thomas Piketty’s evidence on wealth distribution trends in Capital in the Twenty-First Century shows that – contra his own interpretation – there has been little rise in wealth inequality in Europe and America since the 1970s. This article relates that finding to the other principal trends in Piketty’s analysis: the capital/national income ratio trend, the capital-labor split of total incomes and the income inequality trend. Given that wealth inequality is not rising markedly, what can we deduce about the putative causes that might be operating upstream? Only the capital-labor split looks like a plausible explanation of the wealth inequality trend.

scholarly journals Some Major Causes of Current Economic Crises and Leadership Strategies

2010 ◽  
Author(s):  
Asım Şen
Keyword(s):  
Economic Growth ◽  
Wealth Distribution ◽  
Economic Inequality ◽  
Wealth Inequality ◽  
Shared Vision ◽  
Leadership Strategies ◽  
Economic Crises ◽  
The People ◽  
Education And Employment ◽  
Sustainable Economic Growth

This paper argues that economic inequality is one of the major causes of the current economic crises and provides some appropriate leadership strategies for solving them. Inequality is defined as unequal opportunities for economical activities among the people of a nation and among the nations of the world. The major cause of most current economic crises is the income and wealth inequality which are generated mainly by the economic growth. Leaders in the past and currently could not utilize appropriate strategies to solve the inequality problems and consequently the economic crisis grew and reached the current levels. In order to solve the current economic crises it is necessary to eliminate the economic inequality problems and establish fair and sustainable economic growth. The leadership strategies play crucial role for this process. These strategies included in this paper are establishing the local and global shared vision for all; balancing the income and wealth distribution; providing the equal opportunities for education and employment; sharing the production and consumption; and maintaining the fair and sustainable globalization and economic growth.

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