Search Results
Working Paper
A Comment on 'Wealth Inequality and Endogenous Growth' by Byoungchan Lee
How does wealth inequality affect economic growth? Byoungchan Lee answers this question by developing a heterogeneous-agent model and augmenting it with endogenous firm innovation. The novel channel is that rising wealth concentration reduces aggregate demand, which gives firms a disincentive to spend on R&D and therefore leads to slower productivity growth. In this discussion, we first explain the difference in calibration strategy between Lee’s approach and the common approach in the literature, and then discuss its quantitative implications for the effect of rising inequality on ...
Working Paper
Why Are the Wealthiest So Wealthy? New Longitudinal Empirical Evidence and Implications for Theories of Wealth Inequality
CORRECT ORDER OF AUTHORS: Hubmer, Halvorsen, Salgado, Ozkan. We use 1993--2015 Norwegian administrative panel data on wealth and income to study lifecycle wealth dynamics. By employing a novel budget constraint approach, we show that at age 50 the excess wealth of the top 0.1%, relative to mid-wealth households, is accounted for by higher saving rates (38%), inheritances (34%), returns (23%), and labor income (5%). One-fourth of the wealthiest---the "New Money"---start with negative wealth but experience rapid wealth growth early in life. Relative to the "Old Money," the New Money are ...
How Does Human Capital Affect Wealth Inequality?
Accounting for human capital can change the distribution of wealth and some common measures of wealth inequality.
Working Paper
Wealth Inequality and Return Heterogeneity During the COVID-19 Pandemic
Wealth inequality in the U.S., measured by the top 1% wealth share, experienced dramatic changes in the first year of the COVID-19 pandemic. Economic theory suggests that the key to understanding wealth inequality is heterogeneity in the return to net worth across households. To understand the dynamics of wealth inequality during the COVID-19 pandemic, we develop a novel methodology that allows us to estimate the returns to net worth for different groups of households at relatively high frequency. We show that portfolio heterogeneity and asset price movements are the main determinants of ...
Working Paper
Wealth Distribution and Retirement Preparation among Early Savers
This paper develops a new combined-wealth measure by augmenting data on net worth from the Survey of Consumer Finances with estimates of defined benefit (DB) pension and expected Social Security wealth. We use this concept to explore retirement preparation among two groups of households in pre-retirement years (aged 40 through 49 and 50 through 59), and to explore the concentration of wealth. We find evidence of moderate, but rising, shortfalls in retirement preparation. We also show that including DB pension and Social Security wealth results in markedly lower measures of wealth ...
Working Paper
Uninsured risk, stagnation, and fiscal policy
Japan is in the midst of a protracted spell of depressed economic activity. Japan's economic stagnation has occurred against a background of rising earnings risk. Occupational stability is falling as routine occupations disappear and implicit lifetime employment guarantees are gradually disappearing. At the same time, earnings in some high-skilled occupations have continued to grow. The resulting polarization in earnings has also been accompanied by an increase in wealth inequality. We develop a framework that relates these observations. In our model, an increase in uninsured earnings risk ...
Speech
The outlook for the U.S. economy in 2018 and beyond: remarks at the Securities Industry and Financial Markets Association, New York City
Remarks at the Securities Industry and Financial Markets Association, New York City.
The Real State of Family Wealth: Will COVID-19 Worsen Racial, Educational and Generational Gaps in the U.S.?
A new quarterly assessment tracks the pandemic’s impact on wealth trends by demographic groups.
Report
Capital Management and Wealth Inequality
Wealthier individuals have stronger incentives to seek higher returns. We investigate theoretically the effect this has on long-run wealth inequality. Incorporating capital management into a standard Ramsey-Cass-Koopmans model generates substantial long-run inequality: the majority of the population works and holds no capital, while a small minority holds a large amount of capital and manages it full-time. Counterintuitively, financial innovations or policies that reduce return differentials increase long-run wealth inequality. Egalitarian steady states may exist, but are inefficient and ...
Working Paper
Why Are the Wealthiest So Wealthy? A Longitudinal Empirical Investigation
We use 1993–2015 Norwegian administrative panel data on wealth and income to study lifecycle wealth dynamics. At age 50, the excess wealth of the top 0.1%, relative to mid-wealth households, is accounted for by higher saving rates (34%), initial wealth (32%), and higher returns (27%), while higher labor income (5%) and inheritances (1%) account for the residual. One-fourth of the wealthiest—the “New Money”—start with negative wealth but experience rapid wealth growth early in life. Relative to the “Old Money”, the New Money are characterized by even higher saving rates and ...