Heterogeneity and Persistence in Returns to Wealth
We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway’s administrative tax records. We document a number of novel results. First, during our sample period individuals earn markedly different average returns on their net worth and on their financial assets. Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth. Fourth, individual wealth returns exhibit substantial persistence over time. We argue that while this persistence partly reflects stable differences in risk exposure and assets scale, it also reflects persistent heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are (mildly) correlated across generations and there is evidence for assortative mating in wealth and returns to it. We discuss the implications of these findings for several strands of the wealth inequality debate.
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docs.google.com/spreadsheets/d/1k1tKJWgy8BjChwQiYJmdtDHnAfoynwLohx6uBtXSBCQ/edit#gid=0
Link to paper:
web.stanford.edu/~pista/FGMP.pdf
Date:
16 May 2019, 16:30 (Thursday, 3rd week, Trinity 2019)
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Seminar room A
Speaker:
Luigi Pistaferri (Stanford University)
Organising department:
Department of Economics
Part of:
Applied Microeconomics Seminar
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Melis Clark