Wealth Inequality in the United States since 1913
Emmanuel Saez (UC Berkeley)
Gabriel Zucman (LSE)
Wealth Inequality in the United States since 1913 – Introduction
US Income inequality has increased sharply since the 1970s
Mixed existing evidence on wealth inequality changes
=> Is inequality increase driven solely by labor income?
We capitalize income tax return data to estimate new annual series of US wealth concentration since 1913
Key result: Wealth inequality has surged but phenomenon is concentrated mostly within the top .1% (=wealth above $20m)
Outline of the talk
I.The capitalization method
II. The distribution of wealth
III. Robustness and comparison with existing estimates
IV. Decomposing wealth accumulation: income and saving rates
The capitalization method
To obtain wealth, we divide capital income by the rate of return
How the capitalization technique works:
Start from each capital income component reported on individual tax returns
Compute aggregate rate of return for each asset class (using Flow of Funds and aggregate tax data)
Multiply each individual capital income component by 1/rate of return of corresponding asset class
Simple idea, but lot of care needed in reconciling tax with Flow of Funds data
Key assumption: uniform return within asset class
=> Need detailed income components to obtain reliable results
Aggregate income and wealth
Aggregate wealth
W = Total assets minus liabilities of households at market value
Excludes durables, unfunded DB pensions, non-prots
Source: Flow of Funds since 1945, Goldsmith, Wol (1989), Kopczuk and Saez (2004) before
Aggregate income
NIPA since 1929, Kuznets (1941) and King (1930) before 1929
Family unit
Top 1% = Top 1% of all family units [as in Piketty and Saez]
Distributional data: income tax returns
Consistent, annual, high quality data since 1913:
Composition tabulations by size of income 1913-
IRS micro-les with oversampling of the top 1962-
Various additional IRS published stats (estates, IRAs, trusts, foundations)
Detailed income categories:
Dividends, interest (+ tax exempt since 1987), rents, unincorporated business prots (S corporations, partnerships, sole prop.), royalties, realized capital gains, etc.
A lot of income flows to” individual income tax returns
Mutual funds, S corporations, partnerships, holding companies, trusts, etc.
See full PDF here.
