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Heterogeneity in Returns to Wealth and the Measurement of Wealth Inequality

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Listed:
  • Andreas Fagereng
  • Luigi Guiso
  • Davide Malacrino
  • Luigi Pistaferri

Abstract

Lacking a long time series on the assets of the very wealthy, Saez and Zucman (2015) use US tax records to obtain estimates of wealth holdings by capitalizing asset income from tax returns. They document marked upward trends in wealth concentration. We use data on tax returns and actual wealth holdings from tax records for the whole Norwegian population to test the robustness of the methodology. We document that measures of wealth based on the capitalization approach can lead to misleading conclusions about the level and the dynamics of wealth inequality if returns are heterogeneous and even moderately correlated with wealth.

Suggested Citation

  • Andreas Fagereng & Luigi Guiso & Davide Malacrino & Luigi Pistaferri, 2016. "Heterogeneity in Returns to Wealth and the Measurement of Wealth Inequality," American Economic Review, American Economic Association, vol. 106(5), pages 651-655, May.
    • Handle: RePEc:aea:aecrev:v:106:y:2016:i:5:p:651-55
    Note: DOI: 10.1257/aer.p20161022
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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