Working Paper: NBER ID: w21721
Authors: Jess Benhabib; Alberto Bisin; Mi Luo
Abstract: This paper attempts to quantitatively identify the factors that drive wealth dynamics in the U.S. and are consistent with its observed skewed cross-sectional distribution and social mobility. We concentrate on three critical factors: a skewed and persistent distribution of earnings, differential saving and bequest rates across wealth levels, and capital income risk. All of these factors are necessary for matching both distribution and mobility, with a distinct role in inducing wealth accumulation near the borrowing constraints, contributing to the thick top tail of wealth, and affecting upward and/or downward social mobility.
Keywords: Wealth Distribution; Social Mobility; Economic Dynamics
JEL Codes: E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| skewed and persistent distribution of stochastic earnings (D39) | wealth distribution (D31) |
| higher earnings (J31) | greater wealth accumulation (E21) |
| differential saving rates across wealth levels (E21) | thicker top tail of wealth distribution (D39) |
| higher saving rates for the wealthy (G51) | reduced social mobility (J62) |
| capital income risk (E25) | thick top tail of wealth distribution (D31) |
| capital income risk (E25) | social mobility (J62) |