Advances in Measurement of Wealth, Nonwage Income, and Inequality
Paper Session
Friday, Jan. 3, 2025 8:00 AM - 10:00 AM (PST)
- Chair: Sandra Black, Columbia University
The Curious Case of Inheritance: How Important Are Transfers from Parents for Wealth Concentration
Abstract
Wealth concentration is increasingly at the center of academic and public discourse, with much attention focused on the role of parental transfers, such as gifts and inheritances, in perpetuating wealth disparities. Despite this interest, previous research has generally found little role for inheritances in wealth concentration. In this paper we use Norwegian administrative panel data on wealth, income, and inheritances between 1993 and 2015 to study lifecycle wealth accumulation dynamics, focusing on the wealthiest households. By correcting for underreporting of some assets in inheritances as well as taking into account the initial wealth of households at age 18, we challenge the earlier findings and shed new light on the importance of inheritances in the wealth accumulation of the richest households. In particular, at age 50, the excess wealth of the top 0.1%, relative to mid-wealth households, is accounted for in about equal terms by their higher saving rates, inheritances, and returns on capital. Furthermore, our study shows that at least one-fourth of the wealthiest individuals are "Old Money," who begin their working lives with a substantial amount of wealth. Finally, the wealthiest receive intergenerational transfers earlier in the life and more in the form of private equity compared with the rest of the population, who inherit housing wealth around age 50.Inequality and the Corporate Sector
Abstract
In recent decades, scholars have turned to tax data to study the distribution of United States income and wealth. In more recent years, the focus has expanded from information that appears on individual income tax returns to a broader set of data. This shift partly reflects the observation that what appears on individual tax returns is only a subset of “national income” — a subset that is subject to change as laws and incentives change. But the use of both individual tax data and national accounts data has been controversial, and one important piece of this controversy is the role of corporate income and the corporate sector. We provide a framework for thinking about the historical and conceptual relationship between income, inequality, and the corporate sector. We make several contributions. First, we assemble a variety of previously unused data to study the corporate sector and corporate income over the long run. Second, we survey and highlight the importance of long-run sectoral and legal changes — including some that have gone unappreciated in the last thirty years, such as the rise and fall of the so-called General Utilities doctrine — to the allocation of income between the individual and corporate sector and the study of inequality. Third, we show that inequality measures are sensitive to how corporate income is imputed to individuals, and that the primary methods used in existing literature — which rely on dividends and capital gains reported on individual tax returns — may understate top income shares before the 1986 Tax Reform Act. Different imputation methods, such as those that treat small and large firms differently, may suggest higher levels of pre-1986 income inequality, but also less dramatic increases since 1986.Economic Well-Being and the Effects of Transfer Programs using Linked Expenditure and Administrative Data
Abstract
We examine income and consumption-based measures of well-being and the poverty reduction effects of key income sources. We are the first to conduct such analyses using linked expenditure and administrative income data, with the new data having important impacts on the analyses. Our income measures relying on combined survey and administrative data compare much more closely than survey-based aggregates to benchmark totals from national accounts and other sources. The distributions of these combined, or “blended”, income measures are also closer to those of expenditure measures. This is especially true for the very bottom of the distribution, where prior research has revealed concerns about the under-reporting of survey income. We also see less evidence of under-reporting with the blended income measures, with fewer individuals having expenditures that exceed their income. Blended income deep poverty tends to be very close to consumption-based deep poverty measures, closing almost all of the existing gap in deep poverty rates measured using survey-reported income and consumption. Finally, we find larger poverty reduction effects of most blended income sources than survey income sources, whether income or consumption is our base resource measure. This pattern is particularly true for retirement pensions, the EITC, SNAP, housing benefits, and SSI, further indicating that typical analyses of the social safety net understate the anti-poverty impacts of these programs. We are the first to calculate the consumption poverty reduction effects of many government programs and income sources, finding similar or somewhat smaller magnitude changes in consumption poverty than with an income base.Discussant(s)
Emilia Simeonova
,
Johns Hopkins University
Rebecca Diamond
,
Stanford University
Luigi Pistaferri
,
Stanford University
Eric Zwick
,
University of Chicago
JEL Classifications
- C8 - Data Collection and Data Estimation Methodology; Computer Programs
- D1 - Household Behavior and Family Economics