Personal Savings from Top Incomes and Household Wealth Accumulation in the United States

Rishabh Kumar

International Journal of Political Economy, 2016, vol. 45, issue 3, 224-240

Abstract: This article explores the determinants and distribution of household wealth. Looking at U.S. data since 1980, it finds convincing evidence that top incomes were saved at high rates and contributed to the steady increase in the household wealth–income ratio. First, I rule out counterclaims regarding the role of housing and real estate prices finding little evidence of their influence on the trends and magnitudes of household net worth relative to disposable income. With savings as the remaining explanation, I present an accounting decomposition formula that captures savings rates for any reference group using the dynamics of intergroup accumulation rates. This methodology is applied to data from national accounts, balance sheets, and income distribution statistics in order to compute saving rates for the top 1 percent of households in the U.S. income distribution. The estimates also support the idea that top income earners have outsaved other households, thereby capturing an increasing share of wealth.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:mes:ijpoec:v:45:y:2016:i:3:p:224-240

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DOI: 10.1080/08911916.2016.1230448

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