NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Heterogeneity and Persistence in Returns to Wealth

Andreas Fagereng, Luigi Guiso, Davide Malacrino, Luigi Pistaferri

NBER Working Paper No. 22822
Issued in November 2016
NBER Program(s):EFG

We provide a systematic analysis of the properties of individual returns to wealth using twenty years of population data from Norway’s administrative tax records. We document a number of novel results. First, in a given cross-section, individuals earn markedly different returns on their assets, with a difference of 500 basis points between the 10th and the 90th percentile. 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. Fourth, returns have an individual permanent component that accounts for 60% of the explained variation. Fifth, for wealth below the 95th percentile, the individual permanent component accounts for the bulk of the correlation between returns and wealth; the correlation at the top reflects both compensation for risk and the correlation of wealth with the individual permanent component. Finally, the permanent component of the return to wealth is also (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Supplementary materials for this paper:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22822

Users who downloaded this paper also downloaded* these:
Albouy, Behrens, Robert-Nicoud, and Seegert w22823 The Optimal Distribution of Population across Cities
Gilchrist, Schoenle, Sim, and Zakrajšek w22827 Inflation Dynamics During the Financial Crisis
Benhabib and Bisin w21924 Skewed Wealth Distributions: Theory and Empirics
Hubmer, Krusell, and Smith w23011 The Historical Evolution of the Wealth Distribution: A Quantitative-Theoretic Investigation
Chavaz and Rose w22806 Political Borders and Bank Lending in Post-Crisis America
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us