Wealth, Top Incomes, and Inequality

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 US. 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 are critical.

Wealth inequality: Theory, measurement and decomposition

“…Carpentier et al (2017) have used the approach to assess the effects of caps on loan-to-value (LTV) ratios on net wealth inequality across several EU countries. 30 Cowell et al (2017) use RIF-Gini regressions to study the role of inheritance in wealth inequality across several OECD countries. Here we also estimate RIF-P-shares regressions, which given the close link between the Gini index and Lorenz ordinates, give us the opportunity to shed new light on the empirical contribution of different P-shares to the Gini index.…”

The Intergenerational Impact of China's New Rural Pension Scheme

“…), and similar to Germany (9 percent) and the United States (14 percent) (Cowell et al. ). Within each generation, the older the age, the less income and wealth owned, which is consistent with an age effect.…”

“…Pension wealth and human capital were not included, following Cowell et al. () and Saez and Zucman ().…”

“…There is growing evidence that old‐age pensions can influence retirement incentives and intertemporal behavior in labor supply and savings decisions, and can also affect wealth distribution across generations (Castañeda, Díaz‐Giménez, and Ríos‐Rull ; De Nardi and Yang ; Saez and Zucman ; Cowell et al. ).…”

Income and Wealth Inequality in Malta

“…Dispersion in bequests and inter vivos transfers affects wealth inequality more strongly than the one caused by income differences. Life-cycle considerations in relation to pension wealth and total wealth accumulation are examined by Cowell et al (2016).…”