{
  "title": "Heterogeneity and Persistence in Returns to Wealth",
  "publication": "IMF Working Papers, July 27, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/07/27/heterogeneity-and-persistence-in-returns-to-wealth-46095",
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  "summary": "We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway’s administrative tax records. We document a number of novel results.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Systematic analysis of individual returns to wealth using twelve years of population data from Norway’s administrative tax records.\n- Documents novel results on the distribution, determinants, and persistence of wealth returns and discusses implications for the wealth inequality debate."
    },
    {
      "heading": "Key findings on heterogeneity",
      "content": "- Individuals earn markedly different average returns:\n  - Financial assets: a standard deviation of 14%.\n  - Net worth: a standard deviation of 8%.\n- Heterogeneity in returns is not solely due to asset-allocation between safe and risky assets:\n  - Returns are heterogeneous even within asset classes.\n- Returns are positively correlated with wealth:\n  - Moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points.\n  - The same exercise for return to net worth increases the return by 17 percentage points."
    },
    {
      "heading": "Persistence and mechanisms",
      "content": "- Wealth returns exhibit substantial persistence over time.\n- The observed persistence partly reflects:\n  - Stable differences in risk exposure.\n  - Asset scale differences.\n- The observed persistence also reflects:\n  - Persistent heterogeneity in sophistication and financial information.\n  - Entrepreneurial talent."
    },
    {
      "heading": "Intergenerational correlation",
      "content": "- Wealth returns are (mildly) correlated across generations."
    },
    {
      "heading": "Implications for policy and the wealth inequality debate",
      "content": "- Heterogeneous and persistent returns to wealth imply that differences in returns across individuals and generations can amplify wealth concentration.\n- Policy considerations arising from findings include addressing:\n  - Information and sophistication gaps in financial markets.\n  - Barriers to entrepreneurial activity and scaling.\n  - Channels through which higher returns at higher wealth percentiles feed into long-run inequality dynamics.\n\nBy Andreas Fagereng, Luigi Guiso, Davide Malacrino, and Luigi Pistaferri; July 27, 2018 — IMF Working Paper.\n\n---\n\n Content in this bundle\n\n- Heterogeneity and Persistence in Returns to Wealth, WP/18/171, July 2018\n  - Heterogeneity and Persistence in Returns to Wealth, WP/18/171, July 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Heterogeneity and Persistence in Returns to Wealth, WP/18/171, July 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/07/27/heterogeneity-and-persistence-in-returns-to-wealth-46095"
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    "Authors: Andreas Fagereng, Luigi Guiso, Davide Malacrino, Luigi Pistaferri",
    "Published: July 27, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484370063.001",
    "Systematic analysis of individual returns to wealth using twelve years of population data from Norway’s administrative tax records.",
    "Documents novel results on the distribution, determinants, and persistence of wealth returns and discusses implications for the wealth inequality debate.",
    "Individuals earn markedly different average returns:",
    "Heterogeneity in returns is not solely due to asset-allocation between safe and risky assets:",
    "Returns are positively correlated with wealth:",
    "Wealth returns exhibit substantial persistence over time.",
    "The observed persistence partly reflects:",
    "The observed persistence also reflects:",
    "Wealth returns are (mildly) correlated across generations.",
    "Heterogeneous and persistent returns to wealth imply that differences in returns across individuals and generations can amplify wealth concentration.",
    "Policy considerations arising from findings include addressing:",
    "**Heterogeneity and Persistence in Returns to Wealth, WP/18/171, July 2018**"
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