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Decomposing the Growth of Top Wealth Shares

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  • Matthieu Gomez

Abstract

What drives the dynamics of top wealth inequality? To answer this question, I propose an accounting framework that decomposes the growth of the share of aggregate wealth owned by a top percentile into three terms: a within term, which is the average wealth growth of individuals initially in the top percentile relative to the economy; a between term, which accounts for individuals entering and exiting the top percentile due to changes in their relative wealth rankings; and a demography term, which accounts for individuals entering or exiting the top percentile due to death and population growth. I obtain closed‐form expressions for each term in a wide range of random growth models. Evidence from the Forbes 400 list suggests that the between term accounts for half of the recent rise in top wealth inequality.

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  • Matthieu Gomez, 2023. "Decomposing the Growth of Top Wealth Shares," Econometrica, Econometric Society, vol. 91(3), pages 979-1024, May.
    • Handle: RePEc:wly:emetrp:v:91:y:2023:i:3:p:979-1024
    DOI: 10.3982/ECTA16755
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    1. Fernholz, Ricardo T. & Hagler, Kara, 2023. "Rising inequality and declining mobility in the Forbes 400," Economics Letters, Elsevier, vol. 230(C).

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