Household wealth and the measurement of economic well-being in the United States

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in 1 ABSTRACTThe standard official measure of household economic well-being in the United States is gross money income. The general consensus is that such measures are limited because they ignore other crucial determinants of well-being. We modify the standard measure to account for one such determinant: household wealth. We then analyze the level and distribution of economic well-being in the United States during the 1980s and 1990s, using the standard measure and a measure that differs from the standard in that income from wealth is calculated as the sum of lifetime annuity from nonhome wealth and imputed rental-equivalent for owner-occupied homes.Our findings indicate that the level and distribution of economic well-being is substantially altered when money income is adjusted for wealth. Over the 1989-2000 period, median wellbeing appears to increase faster when these adjustments are made than when standard money income is used. This adjustment also widens the income gap between African Americans and whites, but increases the relative well-being of the elderly. Adding imputed rent and annuities from household wealth to household income considerably increases measured inequality and the share of income from wealth in inequality. However, both measures show about the same rise in inequality over the period. Our results contradict the assertion that the "working rich" have replaced the rentiers at the top of the economic ladder.

Long-Run Trends in the Distribution of Income and Wealth

“…Unlike most tax data, surveys allow for household adjustments and, at times, more comprehensive income concepts. Some recent studies recalculate the U.S. top income shares of Piketty and Saez (2003) using some of the largest U.S. household surveys: the Current Population Survey (CPS) (Burkhauser et al 2012) and the Survey of Consumer Finances (SCF) Zacharias 2009, and). These studies are only able to compute estimates since the 1970s.…”

Multidimensional Measurement of Richness: Theory and an Application to Germany

“…Typical features of wealth distributions are described by Jenkins and Jäntti (2005). Especially, wealth is highly unequally distributed (Davies, Sandström, Shorrocks, and Wolff, 2009) and is positively but not perfectly correlated with income (see OECD, 2008;Davies, Sandström, Shorrocks, and Wolff, 2009;Wolff and Zacharias, 2009). In addition, wealth and income represent distinct dimensions of satisfaction with life (see D'Ambrosio, Frick, and Jäntti, 2009).…”

The impact of household capital income on income inequality—a factor decomposition analysis for the UK, Germany and the USA

“…Up to now, some evidence has been produced to show how other income components influence the personal distribution of income (see for instance Jäntti 1997, Jenkins 2000, Lerman and Yitzhaki 1985, O'Higgins et al 1990, Schwarze and Frick 2000, Shorrocks 1983, Wolff and Zacharias 2009. Capital income is seen as playing an important role in this process.…”

“…According to Cannari et al (2008) unrealised capital gains contribute about 40% to wealth variation in Italy. Wolff and Zacharias (2009) show that including capital gains in their extended income measure increases the importance of income from wealth and its share in inequality in the USA. Furthermore, income from wealth and its share in inequality decrease from 1982 to 2000 if capital gains are omitted whereas this result is reverse accounting for capital gains.…”