Wealth Inequality: Opportunity or Unfairness?

56 Pages Posted: 27 May 2022

See all articles by Michael Haliassos

Michael Haliassos

Goethe University Frankfurt - Faculty of Economics and Business Administration; CEPR; NETSPAR; Goethe University Frankfurt - Institute for Monetary and Financial Stability (IMFS)

Thomas Jansson

Sveriges Riksbank - Research Division

Yigitcan Karabulut

Frankfurt School of Finance & Management; CEPR

Multiple version iconThere are 2 versions of this paper

Date Written: April 2022

Abstract

This paper presents evidence of a new propagation mechanism for wealth inequality, based on differential responses, by education, to greater inequality at the start of economic life. It is motivated by a novel positive cross-country relationship between wealth inequality and perceptions of opportunity and fairness, which holds only for the more educated. Using unique administrative micro data and a quasi-field experiment of exogenous allocation of households, the paper finds that exposure to a greater top 10% wealth share at the start of economic life in the country leads only the more educated placed in locations with above-median wealth mobility to attain higher wealth levels and position in the cohort-specific wealth distribution later on. Underlying this effect is greater participation in risky financial and real assets and in self-employment, with no evidence for a labor income, unemployment risk, or human capital investment channel. This differential response is robust to controlling for initial exposure to fixed or other time-varying local features, including income inequality, and consistent with self-fulfilling responses of the more educated to perceived opportunities, without evidence of imitation or learning from those at the top.

Keywords: Education, household finance, Opportunity, propagation of inequality, Refugees, Wealth Inequality

JEL Classification: D1, D31, E21, E44, G5

Suggested Citation

Haliassos, Michael and Jansson, Thomas and Karabulut, Yigitcan, Wealth Inequality: Opportunity or Unfairness? (April 2022). CEPR Discussion Paper No. DP17237, Available at SSRN: https://ssrn.com/abstract=4121420

Michael Haliassos (Contact Author)

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
PF H32
Frankfurt am Main, D-60323
Germany

CEPR

London
United Kingdom

NETSPAR ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Goethe University Frankfurt - Institute for Monetary and Financial Stability (IMFS) ( email )

Theodor-W.-Adorno-Platz 1
Frankfurt, 60323
Germany

Thomas Jansson

Sveriges Riksbank - Research Division ( email )

S-103 37 Stockholm
Sweden

Yigitcan Karabulut

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

CEPR ( email )

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
70
PlumX Metrics