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Portfolio choices, Asset returns and wealth inequality: evidence from China

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  • Wei, Shang-Jin
  • Wu, Weixing
  • Zhang, Linwan

Abstract

This paper empirically investigates the relationship between household porfolio choices and wealth distribution with micro-survey data in China. We show that due to decreasing relative risk aversion, the rich people tend to hold more complicated portfolios and own high-yield assets of stocks, housing and private businesses. As a result, the return for household portfolio increases with wealth, with the well-heeled gains more over the poor in the capital market. This therefore serves as a reason for wealth concentration and decrease of social mobility. Taxation on capital income slows down the growing process of inequality.

Suggested Citation

  • Wei, Shang-Jin & Wu, Weixing & Zhang, Linwan, 2019. "Portfolio choices, Asset returns and wealth inequality: evidence from China," Emerging Markets Review, Elsevier, vol. 38(C), pages 423-437.
    • Handle: RePEc:eee:ememar:v:38:y:2019:i:c:p:423-437
    DOI: 10.1016/j.ememar.2018.11.011
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    More about this item

    Keywords

    Household portfolio; Wealth distribution; Inequality;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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