Bonn Macrohistory Webinar – Luis Bauluz and Filip Novokmet (University of Bonn). Title : The Great Divergence: Wealth Accumulation and Distribution since 1980

Event details

  • Thursday, May 28
  • 4:00 PM
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The Great Divergence: Wealth Accumulation and Distribution since 1980

Wealth-income ratios have strongly increased in developed countries since the 1980s, virtually doubling from values around 300% to 600% of national income (Piketty and Zucman 2014). However, the drivers of this rise or implications for the wealth distribution are not well understood. In this paper, we investigate these aspects in eight developed countries. We provide, for the first time, a systematic decomposition of household portfolio into 3 assets: housing, equity, and fixed-income assets. Next, we decompose wealth accumulation into capital gains and savings for these three assets, both at the aggregate and distributional levels. We highlight three major findings of this paper. First, the main drivers of wealth accumulation have been capital gains in housing and savings in fixed-income assets. Second, this accumulation process benefitted the upper half of the wealth distribution, but not the lower half — a phenomenon not well captured by the standard inequality indicators. Third, in the absence of housing capital gains, the wealth accumulation process would have been more heavily tilted toward the richest top 10%, in line with trends in the income concentration.

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