- The Wealth Inequality of Nations
With Nora Waitkus
show moreComparative research on income inequality has produced several coherent frameworks to study the institutional determinants of income stratification. In contrast, no such framework and much less empirical evidence exist to explain cross-national differences in wealth inequality. This situation is particularly lamentable as cross-national patterns of inequality in wealth diverge sharply from those in income. We seek to pave the way for new institutional explanations of cross-national differences in wealth inequality by tracing them to the influence of different wealth components. Using harmonized data on thirteen countries included in the Luxembourg Wealth Study (LWS), we demonstrate a lack of association between national levels of income and wealth inequality and concentration. Using novel decomposition approaches, we then estimate the degree to which national levels of wealth inequality and concentration relate to cross-national differences in wealth portfolios and the distribution of specific asset components. Considering the role of housing equity, financial assets, non-housing real assets, and non-housing debt, we reveal that cross-national variation in wealth inequality and concentration is centrally determined by the distribution of housing equity. As a result, we suggest the development of a theoretical framework for the comparative analysis of wealth inequalities that focuses on the role of housing markets.
- The Demography of Rising Wealth Inequality
With Matthew Gross & Robert Schoeni
show moreThis project documents the extent and sources of growing wealth inequality drawing on the Survey of Consumer Finances and using demographic decomposition techniques. We also move beyond a static assessment of relative wealth positions to study changes in the level of wealth insecurity, documenting the extent of fluctuations in family wealth and their economic and demographic determinants using the Panel Study of Income Dynamics. Our assessment of wealth inequality and insecurity spans three decades, but we also pay particularly close attention to changes during the Great Recession. The recent acceleration of some of these long-term trends adds urgency to gain a better understanding of the economic and demographic factors underlying them.
- Parental Wealth as Private Insurance
with Martin Hällsten
Working Paper (old version)
show moreThis project seeks to add empirical credibility to the “insurance function” of families’ wealth for their offspring. Drawing on newly assembled wealth register data for Sweden, it significantly expands an earlier project that compared intergenerational wealth effects across the U.S., Germany, and Sweden.
- Avoiding Material Hardship: The Buffer Function of Wealth
with Richard Rodems
show moreWe assess how a variety of disruptive life-course events impact the well-being of U.S. households and trace the importance of household wealth in helping families experiencing these events avoid entering a spell of material hardship. Using longitudinal data from two panels of the Survey of Income and Program Participation (SIPP), we draw on direct measures of material hardship, disruptive events, and household assets. Regression and decomposition analyses reveal that the relationship between disruptive events and the likelihood of experiencing a new spell of material hardship strongly varies across the wealth distribution, suggesting that high household wealth provides an effective private safety net. Like public insurance schemes, wealth insurance helps buffer the effects of disruptive events on material hardship, but unlike public insurance schemes, reliance on private wealth further stratifies the economic well-being of households. Policy options for addressing this highly stratified private insurance scheme include disposing of the need for it by funding a more robust public insurance, for instance through wealth taxation.
- Comparing Child Wealth Inequality Across Countries
with Nora Waitkus
show moreWe provide the first cross-national assessment of wealth inequality among children in 14 countries with distinct policy, institutional, and economic contexts. We demonstrate that in most of the countries included here, and as one would expect, children experience lower levels of household wealth than the remainder of the population, in particular in comparison to seniors. Importantly, children also tend to experience greater levels of wealth inequality and concentration. In many countries, the disadvantage in the wealth circumstances of children is very large and nowhere more so than in the United States. Furthermore, we show that prior research that has established the shape and determinants of income inequality among children cannot provide much guidance for the assessment of the shape and determinants of wealth inequality among children because national levels of child income inequality and child wealth inequality are uncorrelated. That is, countries often differ significantly in the level of inequality among children when measured as income versus wealth, although the United States combines uniquely high levels of child inequality in both wealth and income.
- Intergenerational Transfers and the Concentration of Wealth within Family Lineages
With Alexandra Killewald & Andreja Siliunas
show moreThis project assesses the total degree of inequality in economic opportunity based on sibling and cousin correlations in family wealth. Using the Panel Study of Income Dynamics (PSID), we describe the concentration of wealth within family lineages across two and three generations in the US, answering how much individuals’ wealth attainment depends on the luck of their birth and even the luck of their parents’ birth. We also describe whether the luck of birth is more important for the wealth attainment of certain groups, such as whites or offspring to wealthy families, and we outline some of the channels that shape the opportunity to attain wealth.
- Visualizing Intergenerational Wealth Mobility and Racial Inequality
Socius (2019), with Alexandra Killewald
Visualization, Download, Replication Package
Show AbstractThe black-white gap in household wealth is large and well-documented. Here, we visualize how this racial wealth gap persists across generations. Animating the flow of individuals between the relative wealth position of parents and their adult children, we show that the disadvantage of black families is a consequence both of wealth inequality in prior generations and race differences in the transmission of wealth positions across generations: black children both have less wealthy parents on average and are far more likely to be downwardly mobile in household wealth. By displaying intergenerational movements between parental and offspring wealth quintiles, we underline how intergenerational fluctuation coexists with the maintenance of a severely racialized wealth structure.
- Growing Wealth Gaps in Education
Download, Replication Package, NYT column
Prior research on trends in educational inequality has focused chiefly on changing gaps in educational attainment by family income or parental occupation. In contrast, this contribution provides the first assessment of trends in educational attainment by family wealth and suggests that we should be at least as much concerned about growing wealth gaps in education. Despite overall growth in educational attainment and some signs of decreasing wealth gaps in high school attainment and college access, I find a large and rapidly increasing wealth gap in college attainment between cohorts born in the 1970 and 1980s, respectively. This growing wealth gap in higher educational attainment co-occurred with a rise in inequality in children’s wealth backgrounds, though the analyses also suggest that the latter does not fully account for the former. Nevertheless, the results reported here raise concerns about the distribution of educational opportunity among today’s children who grow up in a context of particularly extreme wealth inequality.
- Generations of Advantage. Multigenerational Correlations in Wealth
Social Forces (2018), with Alexandra Killewald
Download. Replication Package, Fed.Reserve version
Inequality in family wealth is high, yet we know little about how much and how wealth inequality is maintained across generations. We argue that a long-term perspective reflective of wealth’s cumulative nature is crucial to understand the extent and channels of wealth reproduction across generations. Using data from the Panel Study of Income Dynamics that span nearly half a century, we show that a one decile increase in parents’ wealth position is associated with an increase of about 4 percentiles in their offspring’s wealth position in adulthood. We show that grandparental wealth is a unique predictor of grandchildren’s wealth, above and beyond the role of parental wealth, suggesting that a focus on only parent-child dyads understates the importance of family wealth lineages. Second, considering five channels of wealth transmission — gifts and bequests, education, marriage, homeownership, and business ownership — we find that most of the advantages arising from family wealth begin much earlier in the life-course than the common focus on bequests implies, even when we consider the wealth of grandparents. We also document the stark disadvantage of African-American households in terms of not only their wealth attainment but also their intergenerational wealth mobility compared to whites.
- Grand Advantage: Family Wealth and Grandchildren’s Educational Achievement in Sweden
American Sociological Review (2017), with Martin Hällsten
We study the role of family wealth for children’s educational achievement using novel Swedish register data. In particular, we focus on the relationship between grandparents’ wealth and their grandchildren’s educational achievement. Doing so allows us to reliably establish the independent role of wealth in contributing to long-term inequalities in opportunity. We use regression models with extensive controls to account for observed socioeconomic characteristics of families, cousin fixed effects to net out potentially unobserved grandparent effects, and marginal structural models to account for endogenous selection. We find substantial associations between grandparents’ wealth and their grandchildren’s grade point averages (GPA) in the 9th grade that are only partly mediated by parents’ socioeconomic characteristics and wealth. Our findings indicate that family wealth inequality—even in a comparatively egalitarian context like Sweden—has profound consequences for the distribution of opportunity across multiple generations. We posit that our estimates of the long-term consequences of wealth inequality may be conservative for nations other than Sweden, like the United States, where family wealth—in addition to its insurance and normative functions—allows the direct purchase of educational quality and access.
- Wealth Inequality and Accumulation
Annual Review of Sociology (2017), with Alexandra Killewald and Jared Schachner
Research on wealth inequality and accumulation and the data upon which it relies have expanded substantially in the twenty-first century. Although the field has experienced rapid growth, conceptual and methodological challenges remain. We begin by discussing two major unresolved methodological concerns facing wealth research: how to address challenges to causal inference posed by wealth’s cumulative nature and how to operationalize net worth given its highly skewed distribution. Next, we provide an overview of data sources available for wealth research. To underscore the need for continued empirical attention to net worth, we review trends in wealth levels and inequality and evaluate wealth’s distinctiveness as an indicator of social stratification. We then review recent empirical evidence on the effects of wealth on other social outcomes, as well as research on the determinants of wealth. We close with a list of promising avenues for future research on wealth, its causes, and its consequences.
- Does Donald Need Uncle Scrooge? Extended-family wealth and children’s educational outcomes in the United States
Book Chapter (2017), with Irene Prix
For children in less well-off families, the can be buffered if relatives in their extended family can assist by using their economic, social or cultural resources. In this chapter, we demonstrate that wealth in the extended family may serve as a buffer for children from less well-off families, reducing the impact of low parental resources on their educational pathways. By analyzing the role of aunts and uncles’ wealth for children’s educational outcomes as young adults, this chapter synthesizes two recent strands in social mobility research: the growing emphasis on a multigenerational perspective, and the increasing focus on family wealth for reproducing inequality of opportunity. Our results confirm the importance of wealth in the extended family through a careful assessment of compensatory mechanisms in social reproduction processes: even though aunts and uncles’ wealth has no direct impact on children’s educational attainment in our models, it significantly moderates the impact of parental resources for children’s educational outcomes. More precisely, for children with very wealthy aunts and uncles, their chances of completing high school or entering college are significantly less dependent on their parents’ education or income. In other words, wealth in the extended family compensates for disadvantage in a child’s immediate family.
- How Wealth Inequality Shapes Our Future
Russell Sage Foundation Journal of the Social Sciences (2016), with Robert Schoeni
Download, Full Special Issue (editor)
Wealth and wealth inequality are intertwined with almost all aspects of social and economic life: child development, education and human capital, success in the labor market, marriage and divorce, health, consumption, retirement decisions and policies, macroeconomic conditions, and historical events. One goal of this volume is to address many of these dimensions together in one publication to underscore the broad set of causes and consequences of wealth inequality. To that end, the authors bring perspectives from a range of academic disciplines, including economics, sociology, political science, history, demography, and health sciences. Although all of the ten articles are described here, the goal of this introduction is not to simply summarize the findings of those manuscripts. Instead, it is intended as a broad and hopefully accessible overview of relevant research and provides as well some original analyses to describe why wealth inequality is a central factor influencing the nation’s economic, social, and political outcomes and processes and why it therefore deserves the increased attention of scholars, policymakers, and the public.
- Wealth Disparities Before and After the Great Recession
Annals of the American Academy of Political and Social Sciences (2013), with Sheldon Danziger and Robert Schoeni
Download, Policy Brief
The collapse of the labor, housing, and stock markets beginning in 2007 created unprecedented challenges for American families. This study examines disparities in wealth holdings leading up to the Great Recession and during the first years of the recovery. All socioeconomic groups experienced declines in wealth following the recession, with higher wealth families experiencing larger absolute declines. In percentage terms, however, the declines were greater for less advantaged groups as measured by minority status, education, and pre-recession income and wealth, leading to a substantial rise in wealth inequality in just a few years. Despite large changes in wealth, longitudinal analyses demonstrate little change in mobility in the ranking of particular families in the wealth distribution. Between 2007 and 2011, one-fourth of American families lost at least 75 percent of their wealth, and more than half of all families lost at least 25 percent of their wealth. Multivariate longitudinal analyses document that these large relative losses were disproportionally concentrated among lower-income, less educated, and minority households.
- Status Attainment and Wealth in the United States and Germany
Book chapter (2011)
This contribution updates the classical status attainment model and investigates how wealth alters the conclusions about the central factors in the intergenerational transmission of advantage that researchers have drawn from this model. It does by documenting the association between parental wealth and not only children’s final educational status but also their early occupational attainment. The chapter also attempts to provide a first institutional perspective on the importance of wealth for children’s life changes. I offer theoretical arguments for why parental wealth may constitute an important ingredient of advantage in the United States and why the role of wealth in the status attainment process might be different in Germany. However, the empirical analyses reveal a similar role of parental wealth for children’s educational attainment in both nations.