Permanent-Income Inequality

Brant Abbott and Giovanni Gallipoli ()

No 1411, Working Paper from Economics Department, Queen's University

Abstract: We characterize the distribution of permanent-income and quantify the value of assets and human capital in lifetime wealth portfolios. We estimate the distribution of human wealth using nonparametric identification results that allow for state-dependent stochastic discounting and unobserved heterogeneity. The approach imposes no restrictions on income processes or utility. Accounting for the value of human capital delivers a different view of inequality: (i) in 2016 the top 10% share of permanent-income was 1/3 lower than the corresponding share of assets; (ii) however, since 1989, the top 10% share of permanent-income has grown much faster than the corresponding share of assets. Human wealth has a mitigating influence on inequality, but this effect has waned over time due to the growing importance of assets in lifetime wealth portfolios. We find that consumption expenditures are tightly linked to permanent-income; however, liquidity constraints can lead to substantial deviations below permanent-income.

Keywords: Wealth; Human Capital; Permanent Income; Consumption; Inequality (search for similar items in EconPapers)
JEL-codes: D31 E2 E21 I24 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2019-02
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1411.pdf First version 2019 (application/pdf)

Related works:
Journal Article: Permanent‐income inequality (2022)
Working Paper: Permanent-Income Inequality (2019)
Working Paper: Permanent-Income Inequality (2019)
Working Paper: "Permanent Income" Inequality (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1411

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