New thoughts on US wealth inequality: Not simply asset price inflation but high savings and the capitalist spirit

My latest paper in the International Journal of Political Economy (Taylor & Francis)  is now up. This link leads to gated access. Amongst other things, I have developed a simple accounting formula to capture synthetic savings within fractiles. The abstract is summarized below:

Personal savings from top incomes and wealth accumulation in the United States: Results from disaggregated national accounts

This article explores the determinants and distribution of household wealth. Looking at U.S. data since 1980, it finds convincing evidence that top incomes were saved at high rates and contributed to the steady increase in the household wealth–income ratio. First, I rule out counterclaims regarding the role of housing and real estate prices finding little evidence of their influence on the trends and magnitudes of household net worth relative to disposable income. With savings as the remaining explanation, I present an accounting decomposition formula that captures savings rates for any reference group using the dynamics of intergroup accumulation rates. This methodology is applied to data from national accounts, balance sheets, and income distribution statistics in order to compute saving rates for the top 1 percent of households in the U.S. income distribution. The estimates also support the idea that top income earners have outsaved other households, thereby capturing an increasing share of wealth.

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