Working Paper: CEPR ID: DP17237
Authors: Michael Haliassos; Thomas Jansson; Yigitcan Karabulut
Abstract: This paper presents evidence for a new propagation mechanism of wealth inequality. Motivated by cross-country survey evidence, it uses unique administrative microdata and a quasi-field experiment of exogenous assignment to test the hypothesis that, in the presence of significant opportunities for wealth mobility, the more educated respond to greater wealth inequality at the start of economic life by taking more financial, real, and self-employment risks and achieving higher wealth, thereby propagating wealth inequality. We find no evidence for alternative channels of propagation through labor income, unemployment risk, or human capital investment, nor for inspiration, imitation, or learning from the rich.
Keywords: household finance; wealth inequality; propagation of inequality; education; opportunity; refugees
JEL Codes: G5; E21; E44; D31; D1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial exposure to a greater top 10 wealth share (F62) | greater wealth levels for college-educated refugees (I25) |
| initial exposure to a greater top 10 wealth share (F62) | cohort-specific wealth percentiles for college-educated refugees (I24) |
| initial exposure to wealth inequality (I24) | participation in risky financial assets for college-educated refugees (G51) |
| initial exposure to wealth inequality (I24) | participation in risky real assets for college-educated refugees (I25) |
| initial exposure to wealth inequality (I24) | risky occupational choice into self-employment for college-educated refugees (J68) |
| initial exposure to wealth inequality (I24) | wealth rank for college-educated refugees (I24) |
| initial exposure to wealth inequality (I24) | probability of holding stocks for college-educated refugees (I25) |
| initial exposure to wealth inequality (I24) | homeownership for college-educated refugees (R21) |
| initial exposure to wealth inequality (I24) | no similar effects for less educated refugees (I25) |