American Economic Review Vol. 106 No. 5 2016

Heterogeneity in Returns to Wealth and the Measurement of Wealth Inequality

Andreas Fagereng¹; Luigi Guiso²; Davide Malacrino³; Luigi Pistaferri³

¹ Research Department, Statistics Norway, Postboks 8131 Dep., NO-0033 Oslo, Norway (e-mail: ) · ² Einaudi Institute for Economics and Finance, Via Sallustiana 62, 00187 Rome, Italy (e-mail: ) · ³ Department of Economics, Stanford University, Stanford, CA 94305 (e-mail: )

Abstract

Lacking a long time series on the assets of the very wealthy, Saez and Zucman (2015) use US tax records to obtain estimates of wealth holdings by capitalizing asset income from tax returns. They document marked upward trends in wealth concentration. We use data on tax returns and actual wealth holdings from tax records for the whole Norwegian population to test the robustness of the methodology. We document that measures of wealth based on the capitalization approach can lead to misleading conclusions about the level and the dynamics of wealth inequality if returns are heterogeneous and even moderately correlated with wealth.

DOI

10.1257/aer.p20161022

Volume

106

Issue

5

Pages

651-655

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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