Financial and Total Wealth Inequality with Declining Interest Rates

Daniel L. Greenwald, Matteo Leombroni, Hanno Lustig and Stijn Van Nieuwerburgh
Additional contact information
Daniel L. Greenwald: MIT Sloan
Matteo Leombroni: Stanford
Hanno Lustig: Stanford GSB and NBER

Research Papers from Stanford University, Graduate School of Business

Abstract: Financial wealth inequality and long-term real interest rates track each other closely over the post-war period. Faced with lower returns on financial wealth, households with high levels of financial wealth must increase savings to afford the consumption that they planned before the decline in rates. Lower rates beget higher financial wealth inequality. Inequality in total wealth, the sum of financial and human wealth and the relevant concept for household welfare, rises much less than financial wealth inequality and even declines at the top of the wealth distribution. A standard Bewley model produces the observed increase in financial wealth inequality in response to a decline in real interest rates, when high financial-wealth households have a financial portfolio with high duration.

Date: 2021-03
New Economics Papers: this item is included in nep-dge and nep-ifn
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Citations: View citations in EconPapers (12)

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https://dx.doi.org/10.2139/ssrn.3789220

Related works:
Working Paper: Financial and Total Wealth Inequality with Declining Interest Rates (2021)
Working Paper: Financial and Total Wealth Inequality with Declining Interest Rates (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3948

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