Rich and Ever Richer: Differential Returns Across Socio-Economic Groups

Ederer, Stefan and Mayerhofer, Maximilian and Rehm, Miriam (2019) Rich and Ever Richer: Differential Returns Across Socio-Economic Groups. Ecological Economic Papers, 29. WU Vienna University of Economics and Business, Vienna.

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Abstract

This paper estimates rates of return across the gross wealth distribution in eight European countries. Like differential saving rates, differential rates of return matter for Post Keynesian theory, because they impact the income and wealth distribution and add an explosive element to growth models. We show that differential rates of return matter empirically by merging data on household balance sheets with long-run returns for individual asset categories. We find that (1) the composition of wealth differentiates between three socioeconomic groups: 30% are asset-poor, 65% are middle-class home owners, and the top 5% are business-owning capitalists; (2) rates of return rise across all groups; and (3) rates of return broadly follow a log-shaped function across the distribution, where inequality in the lower half of the distribution is higher than in the upper half. If socioeconomic groups are collapsed into the bottom 95% workers and top 5% capitalists, then rates of return are 5.6% for the former and 7.2% for the latter.

Item Type: Paper
Keywords: rate of return; differential; wealth; distribution
Classification Codes: D31 (Personal income, wealth, and their distributions), D33 (Factor income distributions), E43 (Interest Rates: Determination, Term Structure, and Effects), E12 (General aggregative models: Post-Keynesian), E21 (Consumption, saving, wealth)
Divisions: Departments > Sozioökonomie > Ecological Economics
Depositing User: Daniel Schmelz
Date Deposited: 23 Sep 2019 07:55
Last Modified: 22 Oct 2019 00:41
URI: https://epub.wu.ac.at/id/eprint/7179

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