How Wealth Across the Income Distribution Responds to Uncertainty: Insights from the Distributional Financial Accounts

Lilia Maliar and Christopher Naubert

No 21755, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We use the US Distributional Financial Accounts to assess how wealth across the income distribution responds to uncertainty shocks. Following an uncertainty shock, we find that wealth inequality between those in the top percentile of the income distribution and those in the bottom fortieth percentile of the income distribution declines. We show that the result is driven by systematic differences in portfolio composition between high income and low income individuals, with high income individuals having greater exposure to high risk assets. The response of high risk asset inequality is negative while the response of low risk asset inequality is positive. Therefore, the decline in wealth inequality is due to high income individuals losing more relative to lower income individuals rather than lower income individuals catching up to higher income individuals.

Date: 2026-07
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