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Personal Savings from Top Incomes and Household Wealth Accumulation in the United States

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  • Rishabh Kumar

Abstract

This article explores the determinants and distribution of household wealth. Looking at U.S. data since 1980, it finds convincing evidence that top incomes were saved at high rates and contributed to the steady increase in the household wealth–income ratio. First, I rule out counterclaims regarding the role of housing and real estate prices finding little evidence of their influence on the trends and magnitudes of household net worth relative to disposable income. With savings as the remaining explanation, I present an accounting decomposition formula that captures savings rates for any reference group using the dynamics of intergroup accumulation rates. This methodology is applied to data from national accounts, balance sheets, and income distribution statistics in order to compute saving rates for the top 1 percent of households in the U.S. income distribution. The estimates also support the idea that top income earners have outsaved other households, thereby capturing an increasing share of wealth.

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  • Rishabh Kumar, 2016. "Personal Savings from Top Incomes and Household Wealth Accumulation in the United States," International Journal of Political Economy, Taylor & Francis Journals, vol. 45(3), pages 224-240, July.
    • Handle: RePEc:mes:ijpoec:v:45:y:2016:i:3:p:224-240
    DOI: 10.1080/08911916.2016.1230448
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    1. Mariacristina De Nardi, 2015. "Quantitative Models of Wealth Inequality: A Survey," NBER Working Papers 21106, National Bureau of Economic Research, Inc.
    2. Christopher D Carroll, 1997. "Why Do the Rich Save So Much?," Economics Working Paper Archive 388, The Johns Hopkins University,Department of Economics.
    3. Katharina Knoll & Moritz Schularick & Thomas Steger, 2017. "No Price Like Home: Global House Prices, 1870-2012," American Economic Review, American Economic Association, vol. 107(2), pages 331-353, February.
    4. Saez, Emmanuel & Zucman, Gabriel, 2014. "Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data," CEPR Discussion Papers 10227, C.E.P.R. Discussion Papers.
    5. Jesse Bricker & Alice Henriques & Jacob Krimmel & John Sabelhaus, 2016. "Measuring Income and Wealth at the Top Using Administrative and Survey Data," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 261-331.
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    3. Kumar, Rishabh & Schoder, Christian & Radpour, Siavash, 2018. "Demand driven growth and capital distribution in a two class model with applications to the United States," Structural Change and Economic Dynamics, Elsevier, vol. 47(C), pages 1-8.

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