Structuring the Analysis of Wealth Inequality Using the Functions of Wealth: A Class-Based Approach
We integrate concepts from sociology into the economic analysis of inequality and propose a relational approach focusing on different functions of wealth. We operationalize these functions by empirically analyzing the groups of renters, owners, and capitalists. Employing European and US data, we find that classifying households based on these functions of wealth aligns well with the income and wealth distribution, in ways that vary considerably across countries. Our approach allows us to distinguish between wealth as a means of production, as a substitute for public wealth (precautionary wealth), and as a source of non-cash income (housing wealth used). We propose new measures of inequality directly linked to social realities.
The authors thank Maximillian Kasy, Arthur Kennickell, Markus Knell, Frédérique Savignac and Alyssa Schneebaum as well as participants of the first WID conference in December 2017 in Paris, the Joint Statistical Meetings in August 2018 in Vancouver and the NBER/CRIW conference in March 2020 for valuable comments and discussion. We also would like to thank Maximilian Propst and Katharina Drescher for valuable research assistance. The views expressed in this paper are exclusively those of the authors and do not necessarily reflect those of the OeNB or the Eurosystem. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.