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Ponds and streams: wealth and income in the U.S., 1989 to 2007

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  • Arthur B. Kennickell

Abstract

Much discussion treats the working definitions of wealth and income as if they were self-evident, but definitional choices can make substantial differences in the overall picture. To provide a clear basis on which to examine family wealth and income their interrelationship, this paper begins with a basic discussion of a range of possible measures of those concepts. Using the measures developed, the paper examines the distributions of wealth and income and their joint properties using data from the 1989–2007 waves of the Survey of Consumer Finances (SCF). Among other things, the data show a complicated pattern of shifts in the wealth distribution, with clear gains across the broad middle and at the top. For income, there is a more straightforward picture of rising inequality. Over this period, wealth as a fraction of income moved up across both the distributions of wealth and income. Nonetheless, their joint copula distributions (a type of distribution with uniform margins) do not show noticeable changes over this time. The consistent pattern is that very high wealth and income and very low wealth and income go together, but in between these poles, the relationship is fairly diffuse. The paper also presents information on the composition of wealth and income over the 18-year period; the general patterns of holdings across the distributions did not change markedly, but there were some important shifts. For wealth, debt increased as a share of assets across the wealth distribution, the share of principal residences rose mainly below the median of net worth, the share of tax-deferred retirement accounts rose and the share of other financial assets declined. For income, the clearest change was a general decline in the relative importance of capital income other than that from businesses.

Suggested Citation

  • Arthur B. Kennickell, 2009. "Ponds and streams: wealth and income in the U.S., 1989 to 2007," Finance and Economics Discussion Series 2009-13, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2009-13
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    References listed on IDEAS

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    1. Erik Hurst & James P. Ziliak, 2006. "Do Welfare Asset Limits Affect Household Saving?: Evidence from Welfare Reform," Journal of Human Resources, University of Wisconsin Press, vol. 41(1).
    2. Wolff, Edward N., 2007. "The retirement wealth of the baby boom generation," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 1-40, January.
    3. Robert J. Gordon & Ian Dew-Becker, 2008. "Controversies about the Rise of American Inequality: A Survey," NBER Working Papers 13982, National Bureau of Economic Research, Inc.
    4. Arthur B. Kennickell & Annika E. Sunden, 1997. "Pensions, social security, and the distribution of wealth," Finance and Economics Discussion Series 1997-55, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. repec:spr:jlabre:v:38:y:2017:i:3:d:10.1007_s12122-017-9250-y is not listed on IDEAS
    2. Matthias Kredler & Daniel Barczyk, 2012. "Inequality and Asset Prices," 2012 Meeting Papers 929, Society for Economic Dynamics.
    3. Richard C. Sutch, 2016. "The One-Percent across Two Centuries: A Replication of Thomas Piketty’s Data on the Distribution of Wealth for the United States," Working Papers 201602, University of California at Riverside, Department of Economics.
    4. Michael, Bryane & Hartwell, Christopher A. & Ho, Gary, 2013. "Does Financial Market Development Explain (or at Least Predict) the Demand for Wealth Management and Private Banking Services in Developing Markets?," EconStor Preprints 109960, ZBW - German National Library of Economics.
    5. Aboohamidi, Abbas & Chidmi, Benaissa, 2015. "Changes in the Wealth of American Households during the 2007-2009 Financial Crisis in the U.S," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205451, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    6. Emmanuel Saez & Gabriel Zucman, 2014. "Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data," NBER Working Papers 20625, National Bureau of Economic Research, Inc.
    7. Kaymak, Barış & Poschke, Markus, 2016. "The evolution of wealth inequality over half a century: The role of taxes, transfers and technology," Journal of Monetary Economics, Elsevier, vol. 77(C), pages 1-25.
    8. Anthony B. Atkinson & Salvatore Morelli, 2014. "Chartbook of economic inequality," Working Papers 324, ECINEQ, Society for the Study of Economic Inequality.
    9. Lee, Sang Yoon Tim, 2012. "Entrepreneurs, Managers and Inequality," Working Papers 12-15, University of Mannheim, Department of Economics.
    10. Fernholz, Ricardo T., 2016. "A Model of economic mobility and the distribution of wealth," Journal of Macroeconomics, Elsevier, vol. 50(C), pages 168-192.
    11. repec:prg:jnlpep:v:2017:y:2017:i:6:id:630:p:633-645 is not listed on IDEAS
    12. Alan J. Auerbach & Kevin Hassett, 2015. "Capital Taxation in the 21st Century," NBER Working Papers 20871, National Bureau of Economic Research, Inc.
    13. Graciela Sanroman & Guillermo Santos, 2017. "The Joint Distribution of Income and Wealth in Uruguay," Documentos de Trabajo (working papers) 0717, Department of Economics - dECON.

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    Keywords

    Wealth ; Income distribution;

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