Working Paper: NBER ID: w26527
Authors: Conchita D'Ambrosio; Giorgia Menta; Edward N. Wolff
Abstract: Income volatility and wealth volatility are central objects of investigation for the literature on income and wealth inequality and dynamics. Here we analyse the two concepts in a comparative perspective for the same individuals in Italy and the U.S. over the last two decades. Contrary to our expectations, we find that in both countries wealth volatility reaches significantly higher values than income volatility, the effect being mostly driven by changes in the market value of real estate assets. We also show that there is more volatility in both dimensions in the United States and that the overall trend in both countries is increasing over time. We conclude by exploring volatility in consumption.
Keywords: Income volatility; Wealth volatility; Inequality; Economic instability
JEL Codes: D31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Wealth volatility (G59) | Income volatility (D31) |
| Market value of real estate assets (R33) | Wealth volatility (G59) |
| Changes in asset prices (G19) | Wealth volatility (G59) |
| Wealth volatility (G59) | Consumption stability (E21) |
| Income volatility (D31) | Consumption stability (E21) |
| Great Recession (G01) | Income volatility (D31) |
| Great Recession (G01) | Wealth volatility (G59) |