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Report
The Life-Cycle Dynamics of Wealth Mobility
We use 25 years of tax records for the Norwegian population to study the mobility of wealth over people’s lifetimes. We find considerable wealth mobility over the life cycle. To understand the underlying mobility patterns, we group individuals with similar wealth rank histories using agglomerative hierarchical clustering, a tool from statistical learning. The mobility patterns we elicit provide evidence of segmented mobility. Over 60 percent of the population remains at the top or bottom of the wealth distribution throughout their lives. Mobility is driven by the remaining 40 percent, who ...
Working Paper
Use it or Lose it: Efficiency Gains from Wealth Taxation
How does wealth taxation differ from capital income taxation? When the return on investment is equal across individuals, a well-known result is that the two tax systems are equivalent. Motivated by recent empirical evidence documenting persistent heterogeneity in rates of return across individuals, we revisit this question. With such heterogeneity, the two tax systems have opposite implications for both efficiency and inequality. Under capital income taxation, entrepreneurs who are more productive, and therefore generate more income, pay higher taxes. Under wealth taxation, entrepreneurs who ...
Report
A Practitioner’s Note on the Shapley-Owen-Shorrocks Decomposition
Decomposing empirical or economic phenomena into the contributions of different inputs is a frequent goal of economic analysis. However, in many settings, the quantity of interest depends on many inputs which are aggregated non-linearly. In these settings, decompositions need not sum to one and often depend on the order in which inputs are “zeroed out.” In this note we describe a simple but convenient alternative. We show that using the Shapley-Owen value, extended to inequality decompositions in Shorrocks (1999, 2013), provides an additive decomposition that sums to one and is easily ...