Earnings Inequality and Other Determinants of Wealth Inequality

Jess Benhabib, Alberto Bisin and Mi Luo

American Economic Review, 2017, vol. 107, issue 5, 593-97

Abstract: We study the relation between the distribution of labor earnings and the distribution of wealth. We show, theoretically as well as empirically, that while labor earnings and precautionary savings are important determinants of wealth inequality factors, they cannot by themselves account for the thick tail of (the large top shares in) the observed distribution of wealth. Other determinants, like stochastic returns to wealth, as well as savings rates and rates of returns increasing in wealth, need to be accounted for.

JEL-codes: D31 D33 E21 E25 J31 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.p20171005
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Citations: View citations in EconPapers (84)

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