On the Distribution of Estates and the Distribution of Wealth: Evidence from the Dead
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Chapter in forthcoming NBER book Measuring and Understanding the Distribution and Intra/Inter-Generational Mobility of Income and Wealth, Raj Chetty, John N. Friedman, Janet C. Gornick, Barry Johnson, and Arthur Kennickell, editors
Detailed information about the distribution of the estates left at death has commonly served for the estimation of wealth distribution among the living via the mortality multiplier method. The application of detailed mortality rates by demographics and other determinants of mortality is crucial for obtaining an unbiased representation of the wealth distribution of the living. Yet, in this paper we suggest that a simplified mortality multiplier method, derived using average mortality rates and aggregate tabulations by estate size, may be sufficient to derive compelling estimates of wealth concentration. We show that the application of homogeneous multipliers is equivalent to estimate the distribution of estates. The latter also appears sufficiently close in level and trend to the wealth distribution derived in the existing literature with the detailed mortality multiplier method for a variety of countries. The use of mortality rates graduated by estate size does not confute this finding. This paper shows that the application of mortality multipliers does not alter the distribution of estates substantially. We derive the general formal conditions for the similarity between the distributions of wealth of the living and estates at death and discuss the main caveats. We believe these findings may unlock a wide array of aggregate estate tabulations, previously thought to be unusable, for estimating historical trends of wealth concentration.