Citation

Discussion Paper Details

Please find the details for DP13540 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Permanent-Income Inequality

Author(s): Brant Abbott and Giovanni Gallipoli

Publication Date: February 2019

Keyword(s): Consumption, Human Capital, inequality, permanent income and Wealth

Programme Area(s): Labour Economics and Macroeconomics and Growth

Abstract: We characterize the distribution of permanent-income and quantify the value of assets and human capital in lifetime wealth portfolios. We estimate the distribution of human wealth using nonparametric identification results that allow for state-dependent stochastic discounting and unobserved heterogeneity. The approach imposes no restrictions on income processes or utility. Accounting for the value of human capital delivers a different view of inequality: (i) in 2016 the top 10% share of permanent-income was 1/3 lower than the corresponding share of assets; (ii) however, since 1989, the top 10% share of permanent-income has grown much faster than the corresponding share of assets. Human wealth has a mitigating influence on inequality, but this effect has waned over time due to the growing importance of assets in lifetime wealth portfolios. We find that consumption expenditures are tightly linked to permanent-income; however, liquidity constraints can lead to substantial deviations below permanent-income.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13540

Bibliographic Reference

Abbott, B and Gallipoli, G. 2019. 'Permanent-Income Inequality'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13540