Applied Economics Lunch Seminar

Du 25/06/2019 de 12:30 à 13:30

Salle R2-01, Campus Jourdan, 48 boulevard Jourdan, 75014 Paris

MARTíNEZ-TOLEDANO Clara (Imperial College London)

Housing Bubbles, Wealth Inequality and Capital Income Taxation

This paper combines different sources (tax records, national accounts, wealth surveys) to construct wealth distribution series for Spain since the mid-eighties until the present. The wealth inequality series and a new asset-specific accumulation decomposition are then used to analyze how housing booms and busts shape the wealth distribution. Wealth concentration dropped in Spain since the eighties until the end of the housing boom of the 2000s and it increased afterwards during the years of the housing bust. My findings suggest that differences in rates of return and capital gains drive wealth inequality dynamics during housing booms and busts, but saving rates only play a role during busts. Rich individuals diversify their portfolio during the housing bust substituting housing for financial assets, contributing to revert the decreasing trend in wealth concentration of the housing boom. The importance of saving rates on financial assets was exacerbated during the bust due to a large capital income tax reform that created a wedge between the taxation of financial income (interest and dividends) and housing rents. These results provide the type of evidence needed to discipline macroeconomic theories of wealth inequality, asset price changes and capital income taxes.