Working Paper: CEPR ID: DP7850
Authors: Thomas Hintermaier; Winfried Koeniger
Abstract: We use all available waves of the Survey of Consumer Finances to document the evolution of the wealth distribution in the US since the 1980s. We then rely on the shape of this distribution to estimate a life-cycle incomplete markets model. We find that considering a wide range of net-worth percentiles delivers very precise estimates of the structural parameters, impatience and risk aversion. The estimated model predicts some of the observed changes of the net-worth distribution, in particular for young consumers between ages 26 and 35.
Keywords: incomplete markets; life cycle; simulated method of moments; wealth distribution
JEL Codes: D91; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| decline in the real interest rate (E43) | shifts in wealth inequality (D31) |
| increase in labor income risk (J39) | shifts in wealth inequality (D31) |
| lifecycle incomplete markets model (D52) | evolution of the net worth distribution among US consumers (F61) |
| observed changes in net worth (E21) | changes in net worth distribution from 1983 to 2004 (D31) |
| model predictions (C59) | downward tilt in the net worth distribution for younger consumers (F61) |