Applied Economics Lunch Seminar

Du 29/10/2019 de 12:30 à 13:30

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

BLANCHET Thomas ()

Modelling the Dynamics of Wealth Inequality in the United States: 1962–2100

I decompose the dynamics of the wealth distribution using a simple dynamic stochastic model that separates the effects of consumption, labor income, rates of return, growth, demographics and inheritance. Based on two results of stochastic calculus, I show that this model is nonparametrically identified and can be estimated using only repeated cross-sections of the data. I estimate it using distributional national accounts for the United States since 1962. I find that, out of the 15 pp. increase in the top 1% wealth share observed since 1980, about 7 pp. can be attributed to rising labor income inequality, 6 pp. to rising returns on wealth (mostly in the form of capital gains), and 2 pp. to lower growth. Under current parameters, the top 1% wealth share would reach its steady-state value of roughly 45% by the 2040s, a level similar to that of the beginning of the 20th century. These conclusions apply to a wide class of models of the wealth distribution, regardless of the specific ways in which they model, say, consumption or the labor market.