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.