From Saving Comes Having? Disentangling the Impact of Saving on Wealth Inequality

56 Pages Posted: 3 Jan 2018 Last revised: 20 Jul 2018

See all articles by Laurent Bach

Laurent Bach

ESSEC Business School - Finance Department; Swedish House of Finance

Laurent E. Calvet

EDHEC Business School - Department of Economics & Finance; CEPR

Paolo Sodini

Stockholm School of Economics - Department of Finance; Swedish House of Finance

Date Written: December 16, 2017

Abstract

This paper investigates the channels through which saving flows impact the dynamics of wealth inequality. The analysis relies on an administrative panel that reports the assets and income of every Swedish resident at the yearly frequency. We document that the saving rate, defined as saving from labor income divided by net worth, is on average a decreasing function of net worth itself. The saving rate is also highly heterogeneous within net worth brackets. Heterogeneity across and within net worth brackets have conflicting effects on wealth inequality. As a result, saving rate heterogeneity is measured to have a strong impact on social mobility but only a weak impact on the distribution of net worth. Heterogeneity in wealth return is instead the main driver of the recent increase in top wealth shares.

Keywords: Household finance, inequality, saving, consumption, income-to-wealth ratio

JEL Classification: D14, D91, E21, G11

Suggested Citation

Bach, Laurent and Calvet, Laurent E. and Sodini, Paolo, From Saving Comes Having? Disentangling the Impact of Saving on Wealth Inequality (December 16, 2017). Swedish House of Finance Research Paper No. 18-8. Available at SSRN: https://ssrn.com/abstract=3094452 or http://dx.doi.org/10.2139/ssrn.3094452

Laurent Bach

ESSEC Business School - Finance Department ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Laurent E. Calvet (Contact Author)

EDHEC Business School - Department of Economics & Finance ( email )

France

CEPR ( email )

33 Great Sutton Street
London, EC1V 0DX
United Kingdom

Paolo Sodini

Stockholm School of Economics - Department of Finance ( email )

Sveavagen 65, Box 6501
SE-113 83 Stockholm
Sweden
46 8 7369165 (Phone)
46 8 312327 (Fax)

HOME PAGE: http://www.hhs.se/secfi/People/Faculty/Finpso/finp

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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