How Much has Wealth Concentration Grown in the United States? A Re-Examination of Data from 2001-2013

Abstract

Well known research based on capitalized income tax data shows robust growth in wealth concentration in the late 2000s. We show that these robust growth estimates rely on an assumption-homogeneous rates of return across the wealth distribution-that is not supported by data. When the capitalization model incorporates heterogeneous rates of return (on just interest-bearing assets), wealth concentration estimates in 2011 fall from 40.5% to 33.9%. These estimates are consistent in levels and trend with other micro wealth data and show that wealth concentration increases until the Great Recession, then declines before increasing again.

Trends in Household Portfolio Composition

“…The SCF also shows a notable increase in wealth concentration between 2010 and 2016; there are no recent estate tax data estimates, though. These wealth concentration estimates stand in contrast to those first published from capitalized income tax data (Saez and Zucman 2016), in which wealth concentration estimates rise fairly steadily from 1989 through 2013, though tweaking the capitalization model assumptions generally reproduces the SCF and estate-tax wealth concentration trend (Bricker, Henriques, and Hansen 2018).…”

“…During our 1989-2016 sample period, there was a well-documented increase in wealth concentration, evidenced by the rising share of wealth held by the "top 1 percent" of families in the SCF , in capitalized income tax data (Saez and Zucman 2016;Bricker, Henriques, and Hansen 2018), and in a combination of the SCF and other wealth surveys (Fisher et al 2018). The focus of this paper is household assets, while the focus of other papers is wealth-the difference between household assets and debts.…”

“…those studies find that families in the upper-middle part of the wealth distribution claim DB pension wealth (Devlin-Foltz, Henriques et al 2018;).…”

“…Understanding the composition and distribution of household balance sheets-and how the two have evolved over time-is important for a host of economic policies. The allocation of assets and debts will influence household exposure to unexpected economic shocks (Mian, Rao, and Sufi 2013) and the preparedness of the current workforce for future retirement (Henriques et al 2018); portfolio composition also has implications for the transmission of monetary and fiscal policy (Mian, Rao, and Sufi 2013;Benmelech, Miesenzahl, and Ramcharan 2017;Poterba and Samwick 2003), and it can influence the future path of wealth and income inequality (Piketty 2013;Stiglitz 2012).…”

Lifecycle Patterns of Saving and Wealth Accumulation

“…The authors show that the errors are on average small and centered around zero, but they do vary with income and over the business cycle. 4 The Saez and Zucman (2016) capitalized income approach to measuring wealth concentration is sensitive to heterogeneity in the rate of return to capital, as explained by Kopczuk (2015), Bricker, et al (2016), and Bricker, et al (2018). For the purposes of measuring saving, the key point is that the bias from assuming homogeneous returns in the capitalization model maps directly into biased saving estimates.…”