We provide a systematic analysis of the properties of individual returns to wealth using 12 years of population data from Norway's administrative tax records. We document a number of novel results. First, individuals earn markedly different average returns on their net worth (a standard deviation of 22.1%) and on its components. Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within narrow asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the net worth distribution increases the return by 18 percentage points (and 10 percentage points if looking at net‐of‐tax returns). Fourth, individual wealth returns exhibit substantial persistence over time. We argue that while this persistence partly arises from stable differences in risk exposure and assets scale, it also reflects heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.

We provide a systematic analysis of the properties of individual returns to wealth using 12 years of population data from Norway's administrative tax records. We document a number of novel results. First, individuals earn markedly different average returns on their net worth (a standard deviation of 22.1%) and on its components. Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within narrow asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the net worth distribution increases the return by 18 percentage points (and 10 percentage points if looking at net-of-tax returns). Fourth, individual wealth returns exhibit substantial persistence over time. We argue that while this persistence partly arises from stable differences in risk exposure and assets scale, it also reflects heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.

Lacking a long time series on the assets of the very wealthy, Saez and Zucman (2015) use US tax records to obtain estimates of wealth holdings by capitalizing asset income from tax returns. They document marked upward trends in wealth concentration. We use data on tax returns and actual wealth holdings from tax records for the whole Norwegian population to test the robustness of the methodology. We document that measures of wealth based on the capitalization approach can lead to misleading conclusions about the level and the dynamics of wealth inequality if returns are heterogeneous and even moderately correlated with wealth.

We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway's administrative tax records. We document a number of novel results. First, during our sample period individuals earn markedly different average returns on their financial assets (a standard deviation of 14%) and on their net worth (a standard deviation of 8%). Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points-and by 17 percentage points when the same exercise is performed for the return to net worth. Fourth, wealth returns exhibit substantial persistence over time. We argue that while this persistence partly reflects stable differences in risk exposure and assets scale, it also reflects persistent heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.

The cross-sectional distribution of log annual earnings growth becomes more negatively skewed during recessions. However, earnings growth is the sum of changes in employment time (weeks of employment within a year) and changes in earnings rate (weekly earnings). Distinguishing between the two sources of variation is important for interpreting the cyclical patterns of earnings growth. We use administrative data from Italy and survey data from the United States to disentangle the role of employment time in shaping the distribution of earnings growth. We find that year-to-year changes in employment time are responsible for almost all of the tail observations (bellow the 10th and above the 90th percentile), and generate more than four-fifths of the observed cross-sectional variance of earnings growth. Moreover, changes in employment time account for the cyclical properties of the skewness of the earnings growth distribution: the skewness of earnings growth is positively correlated with GDP growth but the correlation disappears when controlling for the skewness of changes in employment time. We show that the cyclicality of aggregate labor market conditions, including the separation rate and the hiring rate, explains the negative skewness of earnings growth during recessions. * We thank Monika Piazzesi and Luigi Pistaferri for valuable guidance. We also thank Nick Bloom, Raj Chetty,