Inês Xavier

amse seminar
à distance

Inês Xavier

Universitat Pompeu Fabra
Wealth inequality in the US: the role of heterogeneous returns
Date(s)
Lundi 22 mars 2021| 11:30 - 12:45
Contact(s)

Ewen Gallic : ewen.gallic[at]univ-amu.fr
Avner Seror : avner.seror[at]univ-amu.fr

Résumé

Why is wealth so concentrated in the United States? In this paper, I investigate the role of return heterogeneity as a source of wealth inequality. Using household-level data from the Survey of Consumer Finances (1989-2019), I provide new empirical evidence on returns to wealth in the United States, and find that wealthier households earn, on average, higher returns: moving from the 20th to the 99th percentile of the wealth distribution raises the average yearly return from 3.6% to 8.3%. To understand how these return differences shape the distribution of wealth, I introduce realistic return heterogeneity in a partial equilibrium model of household saving behavior. This exercise suggests that considering both earnings and return heterogeneity can fully account for the top 10% wealth share observed in the data (76%), which cannot be explained by earnings differences alone.