IDEAS home Printed from https://ideas.repec.org/p/lis/lwswps/24.html
   My bibliography  Save this paper

Wealth, Top Incomes and Inequality

Author

Listed:
  • Frank Cowell
  • Brian Nolan
  • Javier Olivera
  • Philippe Van Kerm

Abstract

Although it is heartening to see wealth inequality being taken seriously, key concepts are often muddled, including the distinction between income and wealth, what is included in ""wealth"", and facts about wealth distributions. This chapter highlights issues that arise in making ideas and facts about wealth inequality precise, and employs newly-available data to take a fresh look at wealth and wealth inequality in a comparative perspective. The composition of wealth is similar across countries, with housing wealth being the key asset. Wealth is considerably more unequally distributed than income, and it is distinctively so in the United States. Extending definitions to include pension wealth however reduces inequality substantially. Analysis also sheds light on life-cycle patterns and the role of inheritance. Discussion of the joint distributions of income and wealth suggests that interactions between increasing top income shares and the concentration of wealth and income from wealth towards the top is critical.

Suggested Citation

  • Frank Cowell & Brian Nolan & Javier Olivera & Philippe Van Kerm, 2017. "Wealth, Top Incomes and Inequality," LWS Working papers 24, LIS Cross-National Data Center in Luxembourg.
  • Handle: RePEc:lis:lwswps:24
    as

    Download full text from publisher

    File URL: http://www.lisdatacenter.org/wps/lwswps/24.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lutz Hendricks, 2007. "Retirement Wealth And Lifetime Earnings," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 421-456, May.
    2. Edward Wolff & Maury Gittleman, 2014. "Inheritances and the distribution of wealth or whatever happened to the great inheritance boom?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 12(4), pages 439-468, December.
    3. Thomas F. Crossley & Cormac O'Dea & Rowena Crawford & Andrew Hood, 2016. "Lifetime Receipt of Inheritances and the Distribution of Wealth in England," Fiscal Studies, Institute for Fiscal Studies, vol. 37, pages 55-75, March.
    4. Simon H. Boserup & Wojciech Kopczuk & Claus T. Kreiner, 2016. "The Role of Bequests in Shaping Wealth Inequality: Evidence from Danish Wealth Records," American Economic Review, American Economic Association, vol. 106(5), pages 656-661, May.
    5. Franco Peracchi & Valeria Perotti, 2010. "Subjective survival probabilities and life tables: Evidence from Europe," EIEF Working Papers Series 1016, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2011.
    6. Frank A. Cowell & Philippe Kerm, 2015. "Wealth Inequality: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 671-710, September.
    7. James Banks & Carl Emmerson & Gemma Tetlow, 2005. "Estimating pension wealth of ELSA respondents," IFS Working Papers W05/09, Institute for Fiscal Studies.
    8. Edward N. Wolff, 2012. "The Asset Price Meltdown and the Wealth of the Middle Class," NBER Working Papers 18559, National Bureau of Economic Research, Inc.
    9. Luc Bissonnette & Michael D. Hurd & Pierre‐Carl Michaud, 2017. "Individual survival curves comparing subjective and observed mortality risks," Health Economics, John Wiley & Sons, Ltd., vol. 26(12), pages 285-303, December.
    10. CHOE Chung & VAN KERM Philippe, 2014. "Foreign workers and the wage distribution: Where do they fit in?," LISER Working Paper Series 2014-02, Luxembourg Institute of Socio-Economic Research (LISER).
    11. Alessie, Rob & Angelini, Viola & van Santen, Peter, 2013. "Pension wealth and household savings in Europe: Evidence from SHARELIFE," European Economic Review, Elsevier, vol. 63(C), pages 308-328.
    12. Wolff, Edward N., 2007. "The retirement wealth of the baby boom generation," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 1-40, January.
    13. Gan, Li & Gong, Guan & Hurd, Michael & McFadden, Daniel, 2015. "Subjective mortality risk and bequests," Journal of Econometrics, Elsevier, vol. 188(2), pages 514-525.
    14. Paglin, Morton, 1975. "The Measurement and Trend of Inequality: A Basic Revision," American Economic Review, American Economic Association, vol. 65(4), pages 598-609, September.
    15. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, May.
    16. Edward N. Wolff, 2015. "U.S. Pensions in the 2000s: The Lost Decade?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(4), pages 599-629, December.
    17. Huggett, Mark, 1996. "Wealth distribution in life-cycle economies," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 469-494, December.
    18. Hills, John & Bastagli, Francesca & Cowell, Frank & Glennerster, Howard & Karagiannaki, Eleni & McKnight, Abigail, 2013. "Wealth distribution, accumulation and policy," LSE Research Online Documents on Economics 51284, London School of Economics and Political Science, LSE Library.
    19. Mariacristina De Nardi, 2004. "Wealth Inequality and Intergenerational Links," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 743-768.
    20. Olympia Bover, 2010. "Wealth Inequality And Household Structure: U.S. Vs. Spain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(2), pages 259-290, June.
    21. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    22. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 818-857, August.
    23. Gokhale, Jagadeesh & Kotlikoff, Laurence J. & Sefton, James & Weale, Martin, 2001. "Simulating the transmission of wealth inequality via bequests," Journal of Public Economics, Elsevier, vol. 79(1), pages 93-128, January.
    24. Marx, Ive & Nolan, Brian & Olivera, Javier, 2014. "The Welfare State and Anti-Poverty Policy in Rich Countries," IZA Discussion Papers 8154, Institute of Labor Economics (IZA).
    25. Jess Benhabib & Alberto Bisin, 2018. "Skewed Wealth Distributions: Theory and Empirics," Journal of Economic Literature, American Economic Association, vol. 56(4), pages 1261-1291, December.
    26. Shinichi Nishiyama, 2002. "Bequests, Inter Vivos Transfers, and Wealth Distribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 892-931, October.
    27. Ingvild Almås & Magne Mogstad, 2012. "Older or Wealthier? The Impact of Age Adjustment on Wealth Inequality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 24-54, March.
    28. Philip Vermeulen, 2018. "How Fat is the Top Tail of the Wealth Distribution?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 357-387, June.
    29. Helmuth Cremer & Pierre Pestieau, 2011. "The Tax Treatment of Intergenerational Wealth Transfers ," CESifo Economic Studies, CESifo, vol. 57(2), pages 365-401, June.
    30. John Laitner, 2002. "Wealth Inequality and Altruistic Bequests," American Economic Review, American Economic Association, vol. 92(2), pages 270-273, May.
    31. Markus Jäntti & Eva M. Sierminska & Philippe Van Kerm, 2015. "Modeling the Joint Distribution of Income and Wealth," Research on Economic Inequality, in: Thesia I. Garner & Kathleen S. Short (ed.), Measurement of Poverty, Deprivation, and Economic Mobility, volume 23, pages 301-327, Emerald Publishing Ltd.
    32. Alessandro Cigno & Pierre Pestieau & Ray Rees, 2011. "Introduction to the Symposium on Taxation and the Family," CESifo Economic Studies, CESifo, vol. 57(2), pages 203-215, June.
    33. Gary V. Engelhardt & Anil Kumar, 2011. "Pensions and Household Wealth Accumulation," Journal of Human Resources, University of Wisconsin Press, vol. 46(1), pages 203-236.
    34. Eva Sierminska & Andrea Brandolini & Timothy Smeeding, 2006. "The Luxembourg Wealth Study – A cross-country comparable database for household wealth research," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 4(3), pages 375-383, December.
    35. Jagadeesh Gokhale & Laurence J. Kotlikoff, 2002. "Simulating the Transmission of Wealth Inequality," American Economic Review, American Economic Association, vol. 92(2), pages 265-269, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Wealth, Top Incomes and Inequality
      by maximorossi in NEP-LTV blog on 2018-04-09 18:40:20

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James B. Davies & Nicole M. Fortin & Thomas Lemieux, 2017. "Wealth inequality: Theory, measurement and decomposition," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1224-1261, December.
    2. Antoine Paccoud, 2020. "The top tail of the property wealth distribution and the production of the residential environment," International Journal of Housing Policy, Taylor & Francis Journals, vol. 20(1), pages 100-119, January.
    3. Anastasios Evgenidis & Apostolos Fasianos, 2019. "Monetary Policy and Wealth Inequalities in Great Britain: Assessing the role of unconventional policies for a decade of household data," Papers 1912.09702, arXiv.org.
    4. Bernal, Noelia & Olivera, Javier, 2020. "Choice of pension management fees and effects on pension wealth," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 539-568.
    5. Bönke, Timm & Grabka, Markus M. & Schröder, Carsten & Wolff, Edward N., 2020. "A Head-to-Head Comparison of Augmented Wealth in Germany and the United States," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 1140-1180.
    6. Sarah Kuypers & Francesco Figari & Gerlinde Verbist, 2020. "An assessment of wealth taxes in a joint income-wealth perspective," Working Papers 2006, Herman Deleeck Centre for Social Policy, University of Antwerp.
    7. Jo Blanden & Andrew Eyles & Stephen Machin, 2021. "Trends in Intergenerational Home Ownership and Wealth Transmission," CEPEO Working Paper Series 21-05, UCL Centre for Education Policy and Equalising Opportunities, revised May 2021.
    8. Anastasios Evgenidis & Apostolos Fasianos, 2021. "Unconventional Monetary Policy and Wealth Inequalities in Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(1), pages 115-175, February.
    9. , Stone Center & Nolan, Brian & Palomino, Juan & Van Kerm, Philippe & Morelli, Salvatore, 2020. "Intergenerational Transfers by Size and Wealth Inequality in Rich Countries," SocArXiv eyh8s, Center for Open Science.
    10. Markus Knell & Reinhard Koman, 2022. "Pension Entitlements and Net Wealth in Austria (Markus Knell, Reinhard Koman)," Working Papers 238, Oesterreichische Nationalbank (Austrian Central Bank).
    11. Ursina Kuhn, 2020. "Augmented wealth in Switzerland: the influence of pension wealth on wealth inequality," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-16, December.
    12. Stefan Humer & Mathias Moser & Matthias Schnetzer, 2017. "Inheritances and the Accumulation of Wealth in the Eurozone," ICAE Working Papers 73, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    13. Olivera, Javier, 2019. "The distribution of pension wealth in Europe," The Journal of the Economics of Ageing, Elsevier, vol. 13(C), pages 30-42.
    14. Jing You & Miguel Niño‐Zarazúa, 2019. "The Intergenerational Impact of China's New Rural Pension Scheme," Population and Development Review, The Population Council, Inc., vol. 45(S1), pages 47-95, December.
    15. Sarah Kuypers & Ive Marx, 2019. "The Truly Vulnerable: Integrating Wealth into the Measurement of Poverty and Social Policy Effectiveness," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 142(1), pages 131-147, February.
    16. Jing You & Miguel Niño-Zarazúa, 2017. "Smoothing or strengthening the ‘Great Gatsby Curve’? The intergenerational impact of China’s New Rural Pension Scheme," WIDER Working Paper Series 199, World Institute for Development Economic Research (UNU-WIDER).
    17. Jing You & Miguel Niño-Zarazúa, 2017. "Smoothing or strengthening the 'Great Gatsby curve'?: The intergenerational impact of China's New Rural Pension Scheme," WIDER Working Paper Series wp-2017-199, World Institute for Development Economic Research (UNU-WIDER).
    18. Salvatore Morelli, 2020. "The Dynamics of Wealth Concentration: Thoughts on Tony Atkinson’s Contributions," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(1), pages 197-205, March.
    19. Arthur B. Kennickell & Peter Lindner & Martin Schürz, 2022. "A new instrument to measure wealth inequality: distributional wealth accounts," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q4/21.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olivera, Javier, 2019. "The distribution of pension wealth in Europe," The Journal of the Economics of Ageing, Elsevier, vol. 13(C), pages 30-42.
    2. Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2018. "Inheritance and wealth inequality: Evidence from population registers," Journal of Public Economics, Elsevier, vol. 165(C), pages 17-30.
    3. Frank A. Cowell & Philippe Kerm, 2015. "Wealth Inequality: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 671-710, September.
    4. Mariacristina De Nardi & Giulio Fella, 2017. "Saving and Wealth Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 280-300, October.
    5. Hendricks, Lutz, 2007. "How important is discount rate heterogeneity for wealth inequality?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(9), pages 3042-3068, September.
    6. Frank Cowell & Eleni Karagiannaki & Abigail McKnight, 2012. "Accounting for Cross-Country Differences in Wealth Inequality," LWS Working papers 13, LIS Cross-National Data Center in Luxembourg.
    7. Carpantier, Jean-Francois & Olivera, Javier & Van Kerm, Philippe, 2018. "Macroprudential policy and household wealth inequality," Journal of International Money and Finance, Elsevier, vol. 85(C), pages 262-277.
    8. De Nardi, Mariacristina & Yang, Fang, 2014. "Bequests and heterogeneity in retirement wealth," European Economic Review, Elsevier, vol. 72(C), pages 182-196.
    9. Cagetti, Marco & De Nardi, Mariacristina, 2008. "Wealth Inequality: Data And Models," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 285-313, September.
    10. Fang Yang, 2005. "Accounting for the heterogeneity in retirement wealth," Working Papers 638, Federal Reserve Bank of Minneapolis.
    11. Pedro Salas-Rojo & Juan Gabriel Rodríguez, 2022. "Inheritances and wealth inequality: a machine learning approach," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(1), pages 27-51, March.
    12. Brian Nolan & Juan Palomino & Philippe Van Kerm & Salvatore Morelli, 2020. "Intergenerational Transfers by Size and Wealth Inequality in Rich Countries," CSEF Working Papers 578, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    13. Korom, Philipp, 2016. "Inherited advantage: The importance of inheritance for private wealth accumulation in Europe," MPIfG Discussion Paper 16/11, Max Planck Institute for the Study of Societies.
    14. Andreas Fagereng & Luigi Guiso & Davide Malacrino & Luigi Pistaferri, 2020. "Heterogeneity and Persistence in Returns to Wealth," Econometrica, Econometric Society, vol. 88(1), pages 115-170, January.
    15. Krueger, D. & Mitman, K. & Perri, F., 2016. "Macroeconomics and Household Heterogeneity," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 843-921, Elsevier.
    16. Toda, Alexis Akira, 2019. "Wealth distribution with random discount factors," Journal of Monetary Economics, Elsevier, vol. 104(C), pages 101-113.
    17. Graciela Sanroman & Guillermo Santos, 2017. "The Joint Distribution of Income and Wealth in Uruguay," Documentos de Trabajo (working papers) 0717, Department of Economics - dECON.
    18. Thomas Y. Mathä & Alessandro Porpiglia & Eva Sierminska, 2011. "The Immigrant/Native Wealth Gap in Germany, Italy and Luxembourg," BCL working papers 57, Central Bank of Luxembourg.
    19. Pirmin Fessler & Martin Schürz, 2018. "Private Wealth Across European Countries: The Role of Income, Inheritance and the Welfare State," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 19(4), pages 521-549, October.
    20. Michał Brzeziński & Katarzyna Sałach, 2020. "Why wealth inequality differs between post-socialist countries?," Working Papers 2020-14, Faculty of Economic Sciences, University of Warsaw.

    More about this item

    Keywords

    Inequality; Wealth; Income; Households; Inheritance; Top Incomes; Cross national; comparative;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lis:lwswps:24. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/lisprlu.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Piotr Paradowski (email available below). General contact details of provider: https://edirc.repec.org/data/lisprlu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.