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Income and Wealth Inequality in America, 1949-2013

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  • Kuhn, Moritz
  • Schularick, Moritz
  • Steins, Ulrike

Abstract

This paper studies the distribution of U.S. household income and wealth over the past seven decades. We introduce a newly compiled household-level dataset based on archival data from historical waves of the Survey of Consumer Finances (SCF). Complementing recent work on top income and wealth shares, the long-run survey data give a granular picture of trends in the bottom 90% of the population. The new data confirm a substantial widening of income and wealth disparities since the 1970s. We show that the main loser of rising income and wealth concentration at the top was the American middle class -- households between the 25th and 75th percentile of the distribution. The household data also reveal that the paths of income and wealth inequality deviated substantially. Differences in the composition of household portfolios along the wealth distribution explain this divergence. While incomes stagnated, the middle class enjoyed substantial gains in housing wealth from highly concentrated and leveraged portfolios, mitigating wealth concentration at the top. The housing bust of 2007 put an end to this counterbalancing effect and triggered the largest spike in wealth inequality in postwar history. Our findings highlight the importance of portfolio composition, leverage and asset prices for wealth dynamics in postwar America.

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  • Kuhn, Moritz & Schularick, Moritz & Steins, Ulrike, 2017. "Income and Wealth Inequality in America, 1949-2013," CEPR Discussion Papers 12218, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12218
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. On the Distribution of Wealth
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2018-04-16 11:56:16

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    2. Foster, John, 2018. "The Consumption Function: A New Perspective," MPRA Paper 84383, University Library of Munich, Germany.
    3. Yang, Xintong & Gan, Li, 2020. "Bequest motive, household portfolio choice, and wealth inequality in urban China," China Economic Review, Elsevier, vol. 60(C).
    4. Jesse Bricker & Sarena F. Goodman & Alice Henriques Volz & Kevin B. Moore, 2021. "A Wealth of Information: Augmenting the Survey of Consumer Finances to Characterize the Full U.S. Wealth Distribution," Finance and Economics Discussion Series 2021-053, Board of Governors of the Federal Reserve System (U.S.).
    5. Christian Dustmann & Bernd Fitzenberger & Markus Zimmermann, 2022. "Housing Expenditure and Income Inequality [Housing demand, cost-of-living inequality, and the affordability crisis]," The Economic Journal, Royal Economic Society, vol. 132(645), pages 1709-1736.
    6. Atkinson, Tony & Hasell, Joe & Morelli, Salvatore & Roser, Max, 2017. "The Chartbook of Economic Inequality," INET Oxford Working Papers 2017-10, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    7. Stefan Ederer & Maximilian Mayerhofer & Miriam Rehm, 2021. "Rich and ever richer? Differential returns across socioeconomic groups," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 44(2), pages 283-301, April.
    8. Aaberge, Rolf & Atkinson, Anthony B. & Modalsli, Jørgen, 2020. "Estimating long-run income inequality from mixed tabular data: Empirical evidence from Norway, 1875–2017," Journal of Public Economics, Elsevier, vol. 187(C).
    9. John Foster, 2021. "The US consumption function: a new perspective," Journal of Evolutionary Economics, Springer, vol. 31(3), pages 773-798, July.
    10. Philipp Ager & Leah Boustan & Katherine Eriksson, 2021. "The Intergenerational Effects of a Large Wealth Shock: White Southerners after the Civil War," American Economic Review, American Economic Association, vol. 111(11), pages 3767-3794, November.
    11. Krapf, Matthias, 2018. "The Joint Distribution of Wealth and Income Risk: Evidence from Bern," Working papers 2018/18, Faculty of Business and Economics - University of Basel.
    12. Dmitry Kuvshinov & Kaspar Zimmermann, 2018. "The Big Bang: Stock Market Capitalization in the Long Run," Working Papers 0136, European Historical Economics Society (EHES).
    13. Albert, Juan-Francisco & Gómez-Fernández, Nerea, 2018. "Monetary policy and the redistribution of net worth in the US," LSE Research Online Documents on Economics 91320, London School of Economics and Political Science, LSE Library.
    14. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2019. "The Total Risk Premium Puzzle?," Working Paper Series 2019-10, Federal Reserve Bank of San Francisco.
    15. Marijn A. Bolhuis & Judd N. L. Cramer, 2020. "The Millennial Boom, the Baby Bust, and the Housing Market," Papers 2003.11565, arXiv.org, revised Aug 2021.
    16. Minsu Chang, 2019. "A House Without a Ring: The Role of Changing Marital Transitions for Housing Decisions," 2019 Meeting Papers 514, Society for Economic Dynamics.
    17. Kuvshinov, Dmitry & Zimmermann, Kaspar, 2018. "The Big Bang: Stock Market Capitalization in the Long Run," MPRA Paper 88581, University Library of Munich, Germany.

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    More about this item

    Keywords

    historical micro data; Household portfolios; Income and wealth inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy

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