Heterogeneity and Persistence in Re turns to Wealth
Abstra ct:
Heterogeneity, persistence, and correlation with wealth of individuals’ returns to savings are key to explain wealth concentration at the top. We provide the first systematic an alysis of the properties of individual returns to wealth using twenty years of population data for Norway. The data consist of information on income f rom capital and asset values from administrative tax records. We establish a number of novel results. First, in a given cross section individuals earn markedly different returns on their assets, with a range of over 500 basis points between the 10th and the 90th percentile. Second, heterogeneity in returns does not arise because of differences in how people allocate their wealth between safe and risky assets. Indeed, returns are heterogeneous eve n within asset classes. Third, returns are positively correlated with wealt h. Fourth, individual returns have a persistent component that explains alm ost 20% of the variation. Fifth, permanent differences in individual return s reflect differences in initial wealth, level and type of education, as we ll as access to private equity investment. Sixth, the fixed component of th e return to wealth is also (mildly) correlated across generations. Finally, there is assortative mating in returns. We discuss the implications of the se findings for the debate about the drivers of wealth concentration, its m easurement, and the relation between income and wealth inequality.
DTSTAMP:20260405T155525Z DTSTART:20160321T173000Z DTEND:20160321T190000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR