The Business Cycle Dynamics of the Wealth Distribution

Jesse Bricker, Joseph Briggs, Sarah Friedman and Kamila Sommer

Journal of Political Economy Macroeconomics, 2025, vol. 3, issue 3, 343 - 381

Abstract: We use new disaggregated household balance sheet measures to quantify the business cycle dynamics of the wealth distribution in the United States since 1989. After introducing these data and establishing their credibility, we show that wealth inequality is highly procyclical, mostly reflecting heterogeneous portfolio exposure to aggregate price risk, although group-specific asset return and saving dynamics also contribute. Furthermore, we show that positive house price shocks lower wealth inequality, while a positive shock to equity prices and unemployment causes inequality to increase, as do accommodative monetary policy shocks.

Date: 2025
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