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Decomposing the Growth of Top Wealth Shares

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  • Matthieu Gomez

Abstract

What drives the dynamics of top wealth inequality? To answer this question, I propose an accounting framework that decomposes the growth of the share of aggregate wealth owned by a top percentile into three terms: a within term, which is the average wealth growth of individuals initially in the top percentile relative to the economy; a between term, which accounts for individuals entering and exiting the top percentile due to changes in their relative wealth rankings; and a demography term, which accounts for individuals entering or exiting the top percentile due to death and population growth. I obtain closed‐form expressions for each term in a wide range of random growth models. Evidence from the Forbes 400 list suggests that the between term accounts for half of the recent rise in top wealth inequality.

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  • Matthieu Gomez, 2023. "Decomposing the Growth of Top Wealth Shares," Econometrica, Econometric Society, vol. 91(3), pages 979-1024, May.
    • Handle: RePEc:wly:emetrp:v:91:y:2023:i:3:p:979-1024
    DOI: 10.3982/ECTA16755
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    Cited by:

    1. Jesus Fernandez-Villaverde & Oren Levintal, 2024. "The Distributional Effects of Asset Returns," PIER Working Paper Archive 24-009, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    2. Richard Audoly & Rory McGee & Sergio Ocampo & Gonzalo Paz-Pardo, 2024. "The life-cycle dynamics of wealth mobility," IFS Working Papers W24/12, Institute for Fiscal Studies.
    3. Laura A. Harvey & Jochen O. Mierau & James Rockey, 2024. "Inequality in an Equal Society," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(4), pages 871-904, August.
    4. Ichiro Muto & Fumitaka Nakamura & Makoto Nirei, 2024. "Digitalization, Entrepreneurship, and Wealth Inequality," IMES Discussion Paper Series 24-E-01, Institute for Monetary and Economic Studies, Bank of Japan.
    5. Joseph L. Gastwirth & Richard Luo & Qing Pan, 2024. "A statistical examination of wealth inequality within the Forbes 400 richest families in the United States from 2000 to 2023," METRON, Springer;Sapienza Università di Roma, vol. 82(3), pages 329-344, December.
    6. Fernholz, Ricardo T. & Hagler, Kara, 2023. "Rising inequality and declining mobility in the Forbes 400," Economics Letters, Elsevier, vol. 230(C).

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