Accounting for the determinants of wealth concentration in the US

Baris Kaymak, David Leung () and Markus Poschke

No 911, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: What are the fundamental determinants of high wealth concentration in the US? The recent literature has put forward high concentration of labor income, capital income risk and bequests as potential reasons. We use data on the joint distribution of earnings, capital income and wealth to identify the relevance of each component, and find that labor income differences are the most relevant source of wealth dispersion for most households. Heterogeneity in asset returns are crucial for generating the thick right tail of the wealth distribution for the wealthiest 0.01% of households. The findings are driven by the high correlation between earnings and wealth, and the substantial share of earned income among top income groups observed in the data.

Date: 2018
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