Wealth inequality in the United States

A recent Chicago Fed working paper, Wealth inequality: data and models (WP 2005-10), summarises key facts about wealth distribution in the United States, and what economic models have been able to explain so far. The authors, Marco Cagetti from the University of Virginia and Mariacristina De Nardi from the Chicago Fed, find that wealth in the US "is highly concentrated and very unequally distributed: the richest 1% hold one third of the total wealth in the economy". As to recent trends:

Inequality increased again in the 1980s. Wolf argues that while wealth inequality fell during the 1970s, it rose sharply after 1979, with a dramatic increase over the 1980s, to the level of in the 1990s. The trend in the 1990s is much less clear. The decade saw a stockmarket boom and the rise of some large internet fortunes, as well as increased income concentration.

Compared with other OECD countries (for which data is available) the US is the most unequal:

..the United States exhibits the highest degree of wealth concentration, with the largest shares of total wealth in the hand of the richest percentiles of the wealth distribution. The lowest values are found in, among others, Australia, Italy, Japan and Sweden, and intermediate values in Canada, France and the United Kingdom.

No real surprises - but a useful overview.

A recent Chicago Fed working paper, Wealth inequality: data and models (WP 2005-10), summarises key facts about wealth distribution in the United States, and what economic models have been able to explain so far. The authors, Marco Cagetti from the University of Virginia and Mariacristina De Nardi from the Chicago Fed, find that wealth in the US "is highly concentrated and very unequally distributed: the richest 1% hold one third of the total wealth in the economy". As to recent trends:

Inequality increased again in the 1980s. Wolf argues that while wealth inequality fell during the 1970s, it rose sharply after 1979, with a dramatic increase over the 1980s, to the level of in the 1990s. The trend in the 1990s is much less clear. The decade saw a stockmarket boom and the rise of some large internet fortunes, as well as increased income concentration.

Compared with other OECD countries (for which data is available) the US is the most unequal:

..the United States exhibits the highest degree of wealth concentration, with the largest shares of total wealth in the hand of the richest percentiles of the wealth distribution. The lowest values are found in, among others, Australia, Italy, Japan and Sweden, and intermediate values in Canada, France and the United Kingdom.

Comments

[Chris H]

I have a couple of questions about these comparisons. Firstly, wouldn't it be more appropriate to either compare the US with the EU or breakdown the US into individual states? I've lived in Florida, California, the UK, France and Germany. By far the widest disparity in cost of living was between Florida and California. Secondly, what happens to these kinds of comparisons when immigration and demographics are factored in? Both the higher percentage of first generation immigrants and the higher percentage of young people in the US, presumably skew the wealth distribution curve.

[Anonymous]

In terms of comparing it to the EU, this is not necesarry as it is done with % rather than exacts figures of how many people have certain amounts of wealth. I think that like the percentage of first generation immigrants and young people do have an effect but probably despite this the US is likely to still have more inequality. Without figures from all those nations of first generation immigrants and young people it is hard to use those as causes, some EU countries may have more immigration with the EU open borders etc.

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