Earnings growth and the wealth distribution.
Where this comes from
- Record sourced from PubMed, PMID 33827927.
- Also identified by DOI 10.1073/pnas.2025368118 and PMC identifier 8053948.
- Licence recorded as CC BY-NC-ND.
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Abstract
As measured by Gini coefficients, fractile inequalities, and tail power laws, wealth is distributed less equally across people than are labor earnings. We study how luck, attitudes that shape saving decisions, and growth rates of labor earnings balance each other in ways that simultaneously shape joint distributions across people of labor earnings, age, and wealth together with an equilibrium rate of return on savings that plays a pivotal role in balancing contending forces. Strong motives for people to save and for firms to demand capital raise an equilibrium interest rate enough to make wealth grow faster than labor earnings. That makes cross-sectional wealth more unevenly distributed and have a fatter tail than labor earnings, as in US data.