Distribution of wealth and incomplete markets: Theory and empirical evidence

This paper analyses the equilibrium distribution of wealth in an economy where firms’ productivities are subject to idiosyncratic shocks, returns on factors are determined in competitive markets, households have linear consumption functions and government imposes taxes on capital and labour incomes and equally redistributes the collected resources to households. The equilibrium distribution of wealth is explicitly calculated and its shape crucially depends on market incompleteness. With incomplete markets it follows a Paretian law in the top tail and the Pareto exponent depends on the saving rate, on the net return on capital, on the growth rate of population, and on portfolio diversification. The characteristics of the labour market crucially affects the bottom tail, but not the upper tail of the distribution of wealth in the case of completely decentralized labour market. The analysis also suggests a positive relationship between growth and wealth inequality. The theoretical predictions find a corroboration in the empirical evidence of United States in the period 1989-2004.     

Saving,Wealth and the Transition from Transfers to Individual Responsibility: The Cases of Taiwan and the United States*

Under the life‐cycle saving model, population aging leads to an increased demand for life‐cycle wealth. Changes in transfer systems create or destroy one component of life‐cycle wealth—transfer wealth. The decline in the familial transfer system in Taiwan and reform of the US Social Security system are two examples of ways that transfer wealth is reduced. The combined effects of aging and changes in transfer systems are analyzed using simulation analysis. Rapid aging and radical decline in transfer systems lead to a large but transitory surge in aggregate saving. Capital per worker increases rapidly and remains at a high level.     

Intergenerational Wealth Elasticity in Japan

This study estimates the intergenerational wealth elasticity using original Japanese survey data and assesses factors explaining the intergenerational wealth elasticity, such as income, educational level, bequests and preferences. The age‐adjusted elasticity of child wealth with respect to parental wealth ranges from 0.266 to 0.367, and transition matrices indicate that the intergenerational transmission of wealth persists more strongly in the tails of the distributions. The correlation between parent and child wealth mainly stems from income, education and bequests, which jointly constitute 63.9% of the wealth elasticity.     

YOUNG BABY BOOMERS' WEALTH

Researchers know relatively little about the beginnings of wealth accumulation. This paper analyzes the wealth of young baby boomers, individuals born from 1957 to 1964, using a previously ignored wealth data set, the National Longitudinal Survey of Youth 1979 (NLSY79). First, a detailed data quality evaluation is performed. Findings suggest that not cleaning NLSY79 wealth data causes nonsensical results, but there are no other serious problems. Analyzing the cleaned wealth data quantifies many stylized facts. For example, the typical baby boomer's wealth holdings increase by more than $2,000 a year. Married females hold more wealth than either married or unmarried males. Finally, while young boomers start with a majority of their wealth in illiquid holdings such as automobiles and possessions, they rapidly shift their wealth holdings into homes as they grow older.     

THE DISSAVING OF ANNUITY WEALTH AND MARKETABLE WEALTH IN RETIREMENT

This paper compares the automatic dissaving of annuity wealth with the discretionary dissaving of marketable wealth that would result from life-cycle consumption behavior by retired persons. In simulations of a life-cycle model based on the isoelastic utility function and realistic parameter values, we find that marketable wealth normally would be dissaved more rapidly than annuity wealth. This suggests that empirical findings that show the opposite relation-slow dissaving of marketable wealth being accompanied by faster dissaving of annuity wealth (or total wealth)-should not be interpreted as evidence that supports the life-cycle theory.     

中国城镇居民的财产分配

本文利用住户调查数据对 1 995年的中国城镇住户的财产分配状况进行了经验分析 ,包括对财产分配的差距进行了测量 ,影响财产分配的主要因素进行了估计 ,并将中国城镇住户的财产分配进行了国际比较。与大部分市场经济国家相比 ,中国城镇居民之间财产分配的差距并不大。但是中国城镇居民的财产分配差距超过了收入分配差距 ,而且从长期趋势上可能会出现加速扩大的势头。中国城镇居民之间财产分配的不均等并非全是经济市场化过程的结果。一些不均等的原因来自于传统计划经济遗留下来的分配模式。本文还发现 ,在户主一生中财产积累出现了两个高峰值。这是与正统的生命周期理论不同的。本文还表明了财产分配和收入分配之间的较强相关性。     

ESTIMATES OF HOUSEHOLD WEALTH INEQUALITY IN THE U.S., 1962–1983

The study has two major objectives. The first is to determine time trends in household wealth inequality in the U.S. over the 1962–83 period. Four concepts of wealth are analyzed: (i) total household wealth, defined as total household assets less liabilities; (ii) fungible wealth, defined as total household wealth less consumer durables and household inventories; (iii) financial wealth, defined as fungible wealth less equity in owner-occupied housing; and (iv) capital wealth, defined as financial wealth less currency, checking accounts, and time deposits. Relying on a variety of data sources, I find that wealth inequality remained relatively constant from about 1962 to 1973, fell sharply from about 1973 to about 1979, and then rose sharply between 1979 and 1983. Concentration in 1983 was greater than that in 1962 for financial and capital wealth but of similar magnitude for total and fungible wealth. The second, methodological in nature, is to analyze the effect on measured inequality of the alignment of raw survey data to national balance sheet totals. I find that the alignment process can significantly affect point estimates of household wealth distribution but does not generally affect the direction of inequality trends.     

The Impact of Inheritance on the Distribution of Wealth: Evidence from Great Britain

Using the British Household Panel Survey, we investigate the role of inheritance in shaping the distribution of household wealth in Great Britain during 1995–2005a period characterized by a substantial increase in wealth and an equally important decrease in wealth inequality. Abstracting from behavioral effects, we find that inheritances received during this period accounted for 30 percent of the increase in wealth of inheritors. Regression estimates of the effect of inheritance on wealth accumulation suggest that households spend 30 percent of their inheritances on average, and that there is substantial heterogeneity in household responses. Households that accumulated more wealth saved a larger share of their inheritances, as did middle aged households and those with lower initial wealth. Although inheritances are highly unequal they had a small impact on overall wealth inequality. This mainly reflected the fact that their size relative to other sources of wealth was very small.     

Wealth inequality,governance and economic growth

Links between economic growth and inequality are of growing interest for researchers and policy makers. Previous studies of this relationship have focused mainly on inequalities in income rather than in wealth. Yet from many perspectives wealth inequality is arguably more important. Using a new panel data set from Credit Suisse for 45 sample countries over the period 2000–2012, this study investigates the effects of wealth inequality on economic growth. Empirical results from system GMM estimation suggest that the wealth inequality is negatively associated with cross-country economic growth. This result is robust to alternative estimators and measures of wealth inequality, as well as the econometric specification. Further empirical investigation reveals that impact of wealth inequality on growth is mitigated by better governance.     

Fashion and wealth accumulation

Summary. This paper examines the influence of fashion on wealth accumulation in an economy with two groups of agents. Fashion is modelled as an externality generated by a particular dependence of individual agents' time preference on the two groups' per-capita consumption habits. It is shown that fashion causes excessive wealth fluctuations in the sense that stronger and more persistent fashion is more likely to generate limit cycles in wealth. Opposite to intuitive arguments , however, the externality in fashion does not necessarily generate instability in wealth. In a special case, equilibrium consumption and wealth are stable but the optimal ones that internalize the externality are locally unstable. Whether equilibrium consumption is excessive relative to optimal consumption depends on the distribution as well as the aggregate level of wealth. Received: December 15, 1995; revised version: July 21, 1998     

The Gender Wealth Gap in Europe: Application of Machine Learning to Predict Individual-level Wealth

This article provides comparative estimates of the gender wealth gaps for 22 European countries, employing data from the Household Finance and Consumption Survey. The data on wealth are collected at the household level, while individual-level data are needed for the estimates of gender wealth gaps. We propose a novel approach using machine learning and model averaging methods to predict individual-level wealth data for multi-person households. Our results suggest that random forest performs best as the predicting tool for this exercise, outperforming elastic net and Bayesian model averaging. The estimated gender wealth gaps tend to be in favor of men, especially at the top of the wealth distribution. Men have 24 percent more wealth than women on average. We also find that a high home ownership rate is associated with a smaller country-level gender wealth gap. Our estimates suggest that the individual-level wealth inequality is on average 3 pp higher than the household-level wealth inequality in multi-member households.     

绿色财富观:生态文明时代人类的理性选择

如果说农业文明社会是以土地资产为主流的财富观,那么工业文明社会则是以有形和无形资产为主流的财富观,而生态文明时代理应是以绿色财富为主流的财富观。本文以生态文明时代为背景,以科学发展观为指导,对绿色财富内涵特征、分类以及构建策略进行了探讨.     

Wealth Effects and Consumption: A Panel VAR Approach

We provide new evidence on the comparison between the stock and housing wealth effects on consumption. Using a panel VAR approach applied to OECD data, we find evidence that the stock market wealth effect is generally the larger. However, with regard to the evolution of asset wealth effects over time, our findings show that the housing wealth effect has outweighed the share market wealth effect in the last decade. We further find that asset wealth has asymmetric effects on consumption, with stronger and more persistent effects from positive asset wealth shocks. Our results have important monetary policy implications for both stock and real estate markets, and offer timely insights into the desirability of current proposals to reduce house price volatility, such as through macro prudential regulations.     

THE INEQUALITY OF WEALTH I N BRITAIN'S NORTH AMERICAN COLONIES: THE IMPORTANCE OF THE RELATIVELY POOR

This paper presents original estimates of the distribution of personal wealth in Nova Scotia, Canada in 1871 using the estate multiplier technique and discusses the sensitivity of estimates of the wealth distribution to the assumed wealth holdings of non-probated decedents. We examine, in particular, the implications of assuming: (1) that non-probated decedents had zero wealth, (2) that the wealth distribution was quasi-Paretian (with parameters that can be estimated from the distribution of wealth of probated decedents) or (3) that the wealth distribution had the form assumed by A. H. Jones in her analysis of wealth inequality in the Thirteen Colonies in 1774. We conclude that it is unlikely that large estates escaped the probate process in Nova Scotia, but it is also unlikely that all non-probated decedents had equal wealth-thus our "best guess" is that the wealth distribution of non-probated decedents was quasi-Paretian. However, a methodology similar to Jones' would have implied considerably less measured inequality in the wealth distribution and greater average wealth in 1871– and would therefore have altered our perception of long term trends in the distribution of wealth and in the rate of accumulation of wealth. The measurement of wealth inequality in a society with a significant slave population, such as the thirteen colonies in 1774, is also highly sensitive to the treatment of slavery. Our preferred estimates of wealth inequality in Nova Scotia in 1871 and in the Thirteen Colonies in 1774 indicate a much higher inequality in the distribution of personal wealth than exists today.     

A NEW LOOK AT THE WEALTH ADEQUACY OF OLDER U.S. HOUSEHOLDS

We examine the current wealth adequacy of older U.S. households using the 1998–2006 waves of the Health and Retirement Study (HRS). We find that the median older U.S. household is reasonably well situated, with a ratio of comprehensive net wealth to present value poverty‐line wealth of about 3.9 in 2006. About 18 percent of households, however, have less wealth than would be needed to generate 150 percent of poverty‐line income over their expected future lifetimes. We see similar patterns of wealth adequacy when we examine ratios of annualized comprehensive wealth to pre‐retirement earnings. Comparing the leading edge of the baby boomers in 2006 to households of the same age in 1998, we find that the baby boomers show slightly less wealth, in real terms, than their elders did, but still appear to have adequate resources at the median. Moreover, we find a rising age profile of annualized wealth, even within households over time and after controlling for other factors, suggesting that older households are not spending their wealth as quickly as their survival probabilities are falling.     

DIFFERENCES IN THE MEASUREMENT OF WEALTH, WEALTH INEQUALITY AND WEALTH COMPOSITION OBTAINED FROM ALTERNATIVE U.S. WEALTH SURVEYS

Since household wealth surveys have been widely used to study saving and other issues, it is important to examine the reliability of the various survey estimates of wealth. In this paper the authors assess the quality characteristics of the National Longitudinal Survey of Mature Men and the Retirement History Survey, as compared to the 1983 Survey of Consumer Finances. We find that the NLS and especially the RHS underreport wealth and wealth concentration. The underestimates of wealth held in the form of common stock, business equity, and investment real estate equity are substantial. The principal problem lies in underrepresentation of both tails of the wealth and income distributions, with the consequences of underrepresenting the upper tail being especially serious for wealth measurement. We examine several potential reasons for the underrepresentation.     

THE DISTRIBUTION OF WEALTH IN CANADA

For estimates of the wealth distribution Canada depends on household surveys taken at 6–7 year intervals. The latest data from this source refer to household balance sheets in the spring of 1977. A comparison with 1970 shows that there is little change in the composition of wealth held by households but that inequality of the wealth distribution has been somewhat reduced. Wealth data by age of family head is presented in order to describe more fully the wealth distribution and composition in Canada.
Weaknesses in the data are discussed as well as the difficulties of making appropriate adjustments to the data at the micro record level. For policy evaluation and formulation purposes the lack of comprehensive estimates inclusive of pension wealth as well as the small sample size (12,700 usable records) have been perceived as greater obstacles to utilizing the data than the underestimate in aggregate assets and debts which affects more the higher than the middle and lower ranges of the wealth distribution.     

Bequests,taxation and the distribution of wealth in a general equilibrium model

This paper examines the role of bequests and of taxation on bequests for the distribution of wealth. We investigate a model with overlapping generations and heterogenous households where parents derive utility directly from their bequests. We obtain all results analytically. Using the coefficient of variation as the measure of inequality, bequests per se diminish the inequality of wealth since they raise private savings and hence average wealth holdings more than the variance of wealth. From a policy perspective, taxing bequests and redistributing government revenue lump-sum among the young generation further decreases wealth inequality.     

A Head-to-Head Comparison of Augmented Wealth in Germany and the United States*

We examine the composition of augmented household wealth (i.e., the sum of net worth and pension wealth) in the United States and Germany. Pension wealth makes up a considerable portion of household wealth, of about 48 percent in the United States and 61 percent in Germany. When pension wealth is included in household wealth, the Gini coefficient falls from 0.889 to 0.700 in the United States, and from 0.755 to 0.508 in Germany. If the wealth shares in Germany were the same as in the United States, this would lead to a 12.6 percent increase in the Gini coefficient in the augmented wealth distribution in Germany.     

Accounting for India's forest wealth

In this paper, we account for forest wealth in India. Changes in the timber and carbon wealth embodied in these forests are related to important green national accounting aggregates such as genuine saving and the change in wealth per capita. Important accounting issues include the timing of carbon releases that occur when forests are disturbed, as well as the valuation of these releases. Our empirical findings suggest that while India's forest wealth is substantial, net changes in this wealth are arguably not so large at least in relation to GNP. However, when viewed in the context of the wealth-diluting effects of population growth this implies a far larger additional savings effort is required to cover the (net) loss in forest values than otherwise appears to be the case. Finally, we examine ways in which the accounting approach that we adopt can be reconciled with approaches which stress conserving forest wealth.