Heterogeneity and Persistence in Returns to Wealth

Arbeitspapier

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 financial assets (a standard deviation of 14%) and on their net worth (a standard deviation of 8%). 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: moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points - and by 17 percentage points when the same exercise is performed for the return to net worth. Fourth, 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. We discuss the implications of these findings for several strands of the wealth inequality debate.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 7107

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Personal Income, Wealth, and Their Distributions ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Macroeconomics: Consumption; Saving; Wealth ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Portfolio Choice; Investment Decisions
• Thema: wealth inequality ; returns to wealth ; financial wealth ; net worth ; heterogeneity ; intergenerational mobility

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Fagereng, Andreas ; Guiso, Luigi ; Malacrino, Davide ; Pistaferri, Luigi
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2018

Weitere Informationen

• Handle: http://hdl.handle.net/10419/181307
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ