Working Paper: CEPR ID: DP11047
Authors: Andreas Fagereng; Luigi Guiso; Davide Malacrino; Luigi Pistaferri
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.
Keywords: heterogeneity; returns to wealth; wealth inequality
JEL Codes: E13; E21; E24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| heterogeneity in returns to wealth (D29) | overstatement of wealth inequality (D31) |
| correlation of returns with wealth (C10) | overstatement of wealth inequality (D31) |
| heterogeneity in returns to wealth (D29) | measurement error in inequality estimates (C20) |
| correlation of returns with wealth (C10) | gap in top 5 wealth share and Gini coefficient (D31) |