What shapes the US wealth distribution? Longevity vs income inequality

We study the role of longevity and rising income inequality in growth of wealth inequality in the U.S. during the past several decades. A rich body of literature documents a rise in income inequality and attributes growing wealth inequality in the United States to rising income inequality, including capital incomes. However, during the post-war period, the U.S. has experienced a colossal rise in life expectancy, especially the rise in probability to survive to old ages, the longevity. Through the lens of any standard overlapping generational model model, this rise in longevity would translate to a rise in wealth inequality due to two mechanisms. A permanent mechanism involves higher wealth accumulation at the peak for each subsequent birth cohort. A transitory mechanism stems from a rising share of individuals close to the peak of wealth accumulation (the so-called baby boomers generation).

@article{ title={What shapes the {U}{S} wealth distribution? {L}ongevity vs income inequality}, author={Tyrowicz, Joanna and Makarski, Krzysztof and Żoch, Piotr}, year={2021} }