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Who is at the top? Wealth mobility over the life cycle

  • Hochguertel, Stefan

    ()

    (Department of Economics, VU University Amsterdam)

  • Ohlsson, Henry

    ()

    (Department of Economics)

Who is wealthy? This paper presents empirical estimates of household movements into and out of the top percents of the wealth distribution over individual life cycles. There are life-cycle motives and precautionary motives for wealth accumulation. The opportunities to accumulate wealth create incentives for education, work effort, and entrepreneurship. We would expect considerable wealth mobility over the life cycle if the life-cycle motives and incentives to accumulate are strong and affect behavior. The data are from an administrative Swedish source that retains wealth information from tax registers. The data are unique, they follow a large sample of households over almost 40 years. There is substantial mobility when we follow individual households over long enough time spans. We find that wealth mobility increased until the end of the 1980s and then started to decrease. Age-wealth probability profiles are consistent with life-cycle motives for wealth accumulation. There are also limited precautionary motives for wealth accumulation when households experience income uncertainty.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2012:1.

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Length: 52 pages
Date of creation: 16 Jan 2012
Date of revision:
Handle: RePEc:hhs:uunewp:2012_001
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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  8. Selin, Håkan, 2009. "The Rise in Female Employment and the Role of Tax Incentives. An Empirical Analysis of the Swedish Individual Tax Reform of 1971," Working Paper Series 2009:4, Uppsala University, Department of Economics.
  9. Roine, Jesper & Waldenström, Daniel, 2007. "Wealth Concentration over the Path of Development: Sweden, 1873–2006," Working Paper Series 722, Research Institute of Industrial Economics, revised 13 Jun 2008.
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  14. Hochguertel, Stefan & Ohlsson, Henry, 2011. "Wealth mobility and dynamics over entire individual working life cycles," Working Paper Series 1301, European Central Bank.
  15. Vincenzo Quadrini, 2000. "Entrepreneurship, Saving and Social Mobility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 1-40, January.
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