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Wealth and Income Inequality in America, 1949-2013

Author

Listed:
  • Ulrike Steins

    (University of Bonn)

  • Moritz Schularick

    (University of Bonn)

  • Moritz Kuhn

    (University of Bonn)

Abstract
Income and wealth inequality in the United States are at historical highs. This paper introduces data from historical waves of the Survey of Consumer Finances (SCF) for the entire post-WW2 period from 1949 to 2013. The new data allow us to add important new aspects to the inequality debate. As the historical household surveys cover the entire balance sheet of households, we can study income and wealth inequality jointly. The data gives us a detailed picture of inequality trends among the bottom 90 %. We document a substantial hollowing out of the middle class as income and wealth concentration at the top was accompanied by losses concentrated in the middle of the distribution. For the first time we can directly contrast the evolution of income and wealth inequality. We show that the income inequality rose earlier and more strongly. We explain this finding by differences in household portfolios. The typical middle-class portfolio is both highly concentrated in housing and highly leveraged. Until the crisis, rising house prices compensated for relative income losses and the growing concentration of financial wealth at the top. Rising middle-class housing wealth gains mitigated the rise in wealth inequality relative to income inequality. The documented differential trends in the evolution of income and wealth inequality provide important information to discriminate between different sources of rising inequality in structural macroeconomic models. Our results highlight the importance of price effects and differences in portfolio composition to understand trends in wealth inequality.

Suggested Citation

  • Ulrike Steins & Moritz Schularick & Moritz Kuhn, 2017. "Wealth and Income Inequality in America, 1949-2013," 2017 Meeting Papers 931, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:931
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    References listed on IDEAS

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    2. John Foster, 2021. "The US consumption function: a new perspective," Journal of Evolutionary Economics, Springer, vol. 31(3), pages 773-798, July.
    3. Yang, Xintong & Gan, Li, 2020. "Bequest motive, household portfolio choice, and wealth inequality in urban China," China Economic Review, Elsevier, vol. 60(C).
    4. Jesse Bricker & Sarena Goodman & Alice Henriques Volz & Kevin B. Moore, 2021. "A Wealth of Information: Augmenting the Survey of Consumer Finances to Characterize the Full U.S. Wealth Distribution," Finance and Economics Discussion Series 2021-053, Board of Governors of the Federal Reserve System (U.S.).
    5. Anthony B. Atkinson & Salvatore Morelli, 2014. "Chartbook of economic inequality," Working Papers 324, ECINEQ, Society for the Study of Economic Inequality.
    6. Stefan Ederer & Maximilian Mayerhofer & Miriam Rehm, 2021. "Rich and ever richer? Differential returns across socioeconomic groups," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 44(2), pages 283-301, April.
    7. Aaberge, Rolf & Atkinson, Anthony B. & Modalsli, Jørgen, 2020. "Estimating long-run income inequality from mixed tabular data: Empirical evidence from Norway, 1875–2017," Journal of Public Economics, Elsevier, vol. 187(C).
    8. Matthias Krapf, 2018. "The Joint Distribution of Wealth and Income Risk: Evidence from Bern," CESifo Working Paper Series 7130, CESifo.
    9. Maximilian Longmuir, 2023. "Fair crack of the whip? The distribution of augmented wealth in Australia from 2002 to 2018," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(4), pages 835-866, December.
    10. Minsu Chang, 2019. "A House Without a Ring: The Role of Changing Marital Transitions for Housing Decisions," 2019 Meeting Papers 514, Society for Economic Dynamics.
    11. Kuvshinov, Dmitry & Zimmermann, Kaspar, 2018. "The Big Bang: Stock Market Capitalization in the Long Run," MPRA Paper 88581, University Library of Munich, Germany.
    12. Albert, Juan-Francisco & Gómez-Fernández, Nerea, 2018. "Monetary policy and the redistribution of net worth in the US," LSE Research Online Documents on Economics 91320, London School of Economics and Political Science, LSE Library.

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