DP11848 Accounting for Wealth Inequality Dynamics: Methods, Estimates and Simulations for France (1800-2014)

Author(s): Bertrand Garbinti, Jonathan Goupille-Lebret, Thomas Piketty
Publication Date: February 2017
Keyword(s): saving rate, steady-state, Wealth Inequality
JEL(s): D31, E21, N34
Programme Areas: Public Economics, Economic History
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11848

This paper combines different sources and methods (income tax data, inheritance registers, national accounts, wealth surveys) in order to deliver consistent, unified wealth distribution series by percentiles for France over the 1800-2014 period, with detailed breakdowns by age, gender, income and assets over the 1970-2014 sub-period. We find a large decline of the top 10% wealth share from the 1910s to the 1980s (from 80-90% of total wealth during the 19th century up until World War 1, down to 50-60% in the 1980s), mostly to the benefit of the middle 40% of the distribution (the bottom 50% wealth share is always less than 10%). Since the 1980s-90s, we observe a moderate rise of wealth concentration, with large fluctuations due to asset price movements. In effect, rising inequality in saving rates and rates of return pushes toward rising wealth concentration, in spite of the contradictory effect of housing prices. We develop a simple simulation model highlighting how the combination of unequal saving rates, rates of return and labor earnings leads to large multiplicative effects and high steady-state wealth concentration. Small changes in the key parameters appear to matter a lot for long-run inequality. We discuss the conditions under which rising concentration is likely to continue in the coming decades.