Working Paper: NBER ID: w20734
Authors: Wojciech Kopczuk
Abstract: I discuss available evidence about the evolution of top wealth shares in the United States over the last one hundred years. The three main approaches – Survey of Consumer Finances, estate tax multiplier techniques and capitalization method – generate generally consistent findings until mid-1980s but diverge since then, with capitalization method showing a dramatic increase in wealth concentration and the other two methods showing at best a small increase. I discuss strengths and weaknesses of different approaches. The increase in capitalization estimates since 2000 is driven by a dramatic and surprising increase in fixed income assets. There is evidence that estate tax estimates may not be sufficiently accounting for mortality improvements over time. The non-response and coverage issues in the SCF are a concern. I conclude that changing nature of top incomes and the increased importance of self-made wealth may explain difficulties in implementing each of the methods and account for why the results diverge.
Keywords: Wealth Concentration; Income Inequality; Capitalization Method; Estate Tax; Survey of Consumer Finances
JEL Codes: D31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capitalization method (G31) | increase in wealth concentration (D31) |
| SCF method (C10) | minimal growth in wealth concentration (D31) |
| estate tax method (H24) | minimal growth in wealth concentration (D31) |
| income inequality (D31) | discrepancies in wealth estimates (D31) |
| capital income (E25) | wealth estimates (D14) |
| tax policy changes (H29) | reported capital income (D33) |