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This paper argues that income and consumption taxation negatively affects innovation, and replacing income taxation with net wealth taxation will contribute to an increase in the demand for innovative products. The paper also suggests that transition from tax-based to contribution-based funding of the public sector will contribute to an increase in the efficiency of the public sector.

Does parental wealth inequality impact next generation labor income inequality? And does a tax on parental wealth affect the labor income distribution of the next generation? We tackle both questions empirically using detailed intergenerational data from Norway, focusing on effects on wages rather than capital income. Results suggest that a net wealth of NOK 1 million increases wages of the children by NOK 14,000. Children of wealthy parents also have a higher labor income mobility. The estimated hypothetical wage distribution without the wealth tax is more unequal. Moreover, suggestive evidence indicates parental wealth is associated with higher labor risk taking.

The central thesis of Katharina Pistor's book is that private law, in conjunction with its increasingly global outreach, serves the interests of the rich and enables “rule by law” (p. 205) rather than a “rule of the law”. The rules of contract law, corporate law, insolvency law, property law and private international law are of particular importance in this regard. According to the author, these areas of the law shape or "encode" the domination of resources and capital in ways that increase wealth and inequality. The book seeks to understand, from a jurisprudential perspective, disruptive economic developments such as the Lehman crisis, rising inequality and the lagging of wages behind general economic development in the US and Western industrialised economies, and it makes proposals for legal policy. The English version, published in 2019, has been widely discussed and largely positively reviewed. This essay presents a decidedly critical perspective. It does not doubt important lines of thought in the book but questions central statements and hypotheses made in it.

What is the impact of student loans on post baccalaureate choices? Using within-college variations in financial aid policies, we find that higher levels of debt induce a front loading of earnings, an underinvestment in human capital and an earlier entry into home ownership. We then estimate a life-cycle model using a representative panel of college graduates and analyze the mechanisms behind the interaction between student debt, career choices and housing. Our results indicate that lower net wealth generates a trade-off between career and housing choices for college graduates. Finally, we compare alternative policy proposals. Relative to the baseline 10-year fixed repayment plan, an income based repayment plan increases human capital accumulation and earnings growth, while postponing entry into home ownership. Importantly, linking repayments to income achieves outcomes that are close to what can be achieved by a more ambitious ”college for all” subsidy plan.

We analyze dynamic of budget receipts, federal budget expenditures and assets in the National Wealth Fund for January-April 2020. Over the period, the federal budget was executed with a surplus, however one should remember that oil and gas revenues reflect the changes on the market the same month and the plunge in oil prices was offset by the currency sale taken from the NWF and non-oil and gas revenues lag behind in their reaction towards the change in the tax base by a quarter. Provided that retail sales and industrial output declined against the previous months of the corresponding period of 2019, one should project decline in proceeds from VAT and income tax in Q2 and Q3 2020.

Incomplete markets models with heterogeneous agents are increasingly used for policy analysis. We propose a novel methodology for solving fully dynamic optimal policy problems in models of this kind, both under discretion and commitment. We illustrate our methodology by studying optimal monetary policy in an incomplete-markets model with non-contingent nominal assets and costly inflation. Under discretion, an inflationary bias arises from the central bank’s attempt to redistribute wealth towards debtor households, which have a higher marginal utility of net wealth. Under commitment, this inflationary force is countered over time by the incentive to prevent expectations of future inflation from being priced into new bond issuances; under certain conditions, long run inflation is zero as both effects cancel out asymptotically. For a plausible calibration, we find that the optimal commitment features first-order initial inflation followed by a gradual decline towards its (near zero) long-run value. Welfare losses from discretionary policy are first-order in magnitude, affecting both debtors and creditors.

Italian Abstract: I conti patrimoniali sono parte del sistema di contabilita nazionale e forniscono un quadro completo della ricchezza di un paese e della sua evoluzione temporale. Nel lavoro vengono presentati i conti patrimoniali dell’Italia costruiti utilizzando i dati dei conti finanziari prodotti dalla Banca d’Italia e quelli delle attivita non finanziarie calcolati dall’Istat. Offriamo inoltre evidenza delle specificita italiane nel confronto internazionale, tenendo in considerazione i limiti di comparabilita tra le statistiche sulle attivita non finanziarie nei diversi paesi. In Italia il peso delle attivita non finanziarie sul totale della ricchezza e salito tra il 2005 e il 2008 dal 43 al 47 per cento per effetto della dinamica dei prezzi dei fabbricati, per poi ridursi lentamente dal 2012 e raggiungere il 41 per cento alla fine del 2017. La ricchezza netta delle famiglie italiane compensa ampiamente i valori negativi registrati dalle amministrazioni pubbliche. Il rapporto tra ricchezza netta e reddito risulta in Italia elevato nel confronto con altre economie; il divario con gli altri paesi e andato tuttavia riducendosi nel corso dell’ultimo decennio. English Abstract:Balance sheet statistics are included in the national accounts system and provide a complete framework for analysing the wealth of a nation and its evolution over time. The paper presents Italian balance sheets, compiled using data on financial accounts produced by the Bank of Italy and non-financial asset data calculated by Istat, the Italian National Institute of Statistics. We provide stylized facts on the comparison between Italy and other major economies, taking into account the statistical comparability limits on non-financial assets across countries. In Italy, the ratio of non-financial assets to gross wealth increased from 43 to 47 per cent between 2005 and 2008 because of the dynamics of housing prices. It then gradually decreased from 2012, reaching 41 per cent at the end of 2017. The net wealth of Italian households far outweighs the negative values reported in the public sector. The ratio of net wealth to income is high in Italy compared with other countries; nevertheless, the gap has narrowed over the last decade.

Home equity represents a substantial share of retirement wealth for many older persons, particularly in Asia where national housing policies have encouraged homeownership. This paper explored the potential for reverse mortgages to help ‘asset-rich and cash-poor’ older Singaporeans unlock their home equity while ageing-in-place. The empirical analysis was based on a nationally representative survey of homeowners age 50+ in the 2018 Singapore Life Panel (N=6,258). Our analyses showed that the average older homeowner holds some 60% of total net wealth in housing equity, suggestive of high demand potential for reverse mortgage products. Nevertheless, actual interest in such products was much below potential demand. Only one in four older homeowners indicated interest in commercial reverse mortgages if these were to become available; a larger majority never heard of the financial product. Interest in reverse mortgages was positively associated with product awareness and self-rated product understanding. This implies that a critical step towards building consumer interest would be to enhance awareness of such products and simplify related contract terms. Having a mortgage, fewer children, financial literacy, and preparedness for retirement were also positively associated with interest level. These results have implications for targeted interventions to enhance consumer awareness and spur interest in reverse mortgages, especially in ageing societies where older people have built up substantial equity through the housing market over time.

This report quantifies long-run stock market outcomes in terms of the increases or decreases (relative to a Treasury bill benchmark) in shareholder wealth, when considering the full history of both net cash distributions and capital appreciation. The study includes all of the 26,168 firms with publicly-traded U.S. common stock since 1926. Despite the fact that investments in the majority (57.8%) of stocks led to reduced rather than increased shareholder wealth, U.S. stock market investments on net increased shareholder wealth by $47.4 trillion between 1926 and 2019. Technology firms accounted for the largest share, $9.0 trillion, of the total, but Telecommunications, Energy, and Healthcare/ Pharmaceutical stocks created wealth disproportionate to the numbers of firms in the industries. The degree to which stock market wealth creation is concentrated in a few top-performing firms has increased over time, and was particularly strong during the most recent three years, when five firms accounted for 22% of net wealth creation. These results should be of interest to any long-term investor assessing the relative merits of broad diversification vs. narrow portfolio selection.

This paper attempts to achieve three objectives, first: to investigate the effect of demographic factors of the investor (age, gender, number of dependents, level of education, occupation, average monthly income, investment experience and net wealth) on investor’s risk tolerance using FAHP. Second: to identify the difference or agreement between the results of AHP and those of FAHP. Finally: to identify the difference or agreement between investor’s risk tolerance calculated by the expert (using the suggested model) and those estimated by the investor. Results show that all indicated demographic factors may affect investor's risk tolerance, where middle-aged, male, small numbers of dependents, high qualification, business owner, high-income, long-term investment experience and High-net wealth are more risk tolerance than others. Beside, findings indicate that there is no significant difference between the results of FAHP and those of AHP, and that there is no significant difference between the risk tolerance levels calculated by the expert (using the suggested model) and those estimated by the investor.

This paper analyzes macroeconomic growth of the economies in Southeast Asia since the end of the Second World War. It argues that there appears a convergence in development strategy among the economies in this region in recent decades. With few exceptions, every economy in Southeast Asia has become more market-oriented, more outward-looking, and more industrialized. Along with this transformation, their economies have grown rapidly and their income today is multiple times higher than what it was at the end of the Second World War. However, the convergence of development strategy did not take place in a few years but occurred sequentially over the course of half a century. The sequence in which each country adopted the growth-enhancing strategy is correlated to the ranking of per capita income. Singapore, the country with highest income today, was also the first one that implemented this strategy in 1965, followed by Malaysia and Thailand in the 1970s, Indonesia in the early 1980s, Vietnam and Lao PDR in the late 1980s, and Cambodia in the early 1990s. Even Myanmar, once one of the closest economies in the world, adopted similar strategy in the late 1980s and eventually opened up its economy in 2010. The paper also discusses the limit and the drawback of the growth strategy currently adopted by virtually all economies in this region.

Given the importance of housing as a component of a household’s worth and of aggregate national wealth, we ask: What variables determine housing value in the Rio de Janeiro Metropolitan Region? What is Rio’s aggregate residential wealth (i.e., the sum of the values of all housing units) and its distribution among household income and tenure groups and in space? In other words, what generates residential wealth? How much residential wealth is there? Who holds it? Where is it located? To address these questions, we first calibrate a hedonic residential rent model with microdata from the 2010 Population Census. We then use this model to estimate the rents for homeowners and subsequently transform the actual and imputed rents into housing values. Finally, we analyze the distribution of residential wealth by household income and tenure and subregions and discuss the policy implications of our findings.

The net wealth accumulation of (grand)parents appears to be strongly determinative of the net wealth holdings of their adult (grand)children. While these general features are understood, few details are known about the persistence of wealth components that determine overall portfolio outcomes and their variance. Using longitudinal data, I show that grandparents and parents figure prominently, not only in net wealth, but also in a range of household portfolio allocations (risky assets, safe assets, non-financial assets) of the current generation. Meanwhile, I find that there is persistence in intergroup disparities in wealth components. I find consistent results whether I examine intergenerational wealth correlation before or after the Great Recession of 2007-2009. These findings shed light on the connection between intergenerational networks, asset building, and intergroup disparities in wealth.

This article investigates issues related to a unique experiment carried out in Russia in unifying the collection of all obligatory payments. It analyzes the legal aspects of this approach and presents the variety of methods for collecting such payments. Notions of budget revenue and sources of revenue are considered. Special attention is paid to the forms and practices of tax farming and other obligatory payments. The article concludes that the budget legislation actually specifies various fiscal charges as sources of budget revenue. The real source of public revenue are the assets and resources making up the national wealth. Historical examples show that despite the generally accepted denial, tax farming is a normal method and can be applied along with the state monopoly and tax administration. The cases when tax farming is transformed into a state monopoly or excise and vice versa are not rare. Tax farming, which has continued to this day, is also referred to as parafiscal charges or quasi taxes

We study compound returns to nearly 62,000 global common stocks during the 1990 to 2018 period, documenting that the majority, 56% of US stocks and 61% of non-US stocks, under perform one-month US Treasury bills over the full sample. Focusing on aggregate shareholder wealth creation measured in US dollars, we find that the top-performing 1.3% of firms account for the $US 44.7 trillion in global stock market wealth creation from 1990 to 2018. Outside the US, less than one percent of firms account for the $US 16.0 trillion in net wealth creation. These results highlight the practical implications of the fact that the distribution of long-run stock returns is strongly positively skewed.

The idea of a wealth tax has taken on new prominence since French economist Thomas Piketty famously proposed a global wealth tax in 2013; Senator Elizabeth Warren has even made a national wealth tax a plank in her campaign to become the Democratic presidential candidate in 2020. The current interest in wealth taxation is a response to the increase in wealth concentration and income inequality that has occurred in most OECD countries. It has been well documented that both income and wealth inequality have risen significantly in recent decades. In this Commentary, we critically evaluate the case for an annual wealth tax as part of Canada’s tax system. To do so, we review current received wisdom on the elements of a good tax system, drawing on the normative tax design literature and best practices. We do not address the issue of how responsive tax policy needs to be to deal with the evolving inequality of income and wealth. Our focus, instead, is on the mix of policy instruments that are most effective for whatever degree of responsiveness policymakers choose. Our argument is that wealth taxes add relatively little to the taxes on capital and capital income that are already in place, and that concerns about the social consequences of wealth concentration are better addressed by reform of existing capital income taxes and by considering wealth transfer (inheritance) taxation. Our argument against wealth taxation is over and above the substantial administrative challenges in measurement, collection and coverage for annual wealth taxes. These alone are enough to raise red flags about wealth taxation. For our part, we rely on the more fundamental argument that annual net wealth taxes are unnecessary since their objectives can be better achieved by suitably designed taxes on capital income and wealth transfers.

Policymaker and media attention has recently focused on the rise of the so-called “gig” or freelance employment sector, where workers lack formal long-term relationships with one specific firm. This topic has captured public interest partly because of concern that those engaged in nontraditional work arrangements may lack the opportunity to save in formal retirement plans. This paper examines how the self-employed in Singapore compare to regular employees as well as the unemployed in terms of retirement preparedness, retirement saving, and portfolio diversification. We also investigate the extent to which differences in financial literacy can account for the different behaviors across types of workers. Overall, we find that the self-employed and employees save and invest remarkably similarly. Financial literacy is quite important: respondents scoring one additional correct answer on the FinLit questions have about 3% more net financial wealth, 2% more nonhousing net wealth, and 14% more total wealth than their less savvy counterparts. More financially literate individuals also hold better diversified portfolios over the life cycle.

The subject of this study shall consider the outlooks of Prof. Eqrem Cabej regarding the Albanian oral art creativity. This is carried out with a view to properly analyse the views and opinions articulated by Prof. Cabej in his work perspectives and studies, whether it is about the Albanian oral literature, as an indivisible national wealth, narrowly linked to the history and economic and political circumstances of the Albanian people, or whether it is about particular sections of this literature, always aiming to enlighten his views on the values of oral literature. At the same time, other subjects of the study also take account of additional views of Prof. Cabej about literature, particularly the subjects, themes, characters and variants of oral literature that we may encounter among the peoples of the Balkan Peninsula. This means that he will approach these problems from within, for the reason that there he shall find the safest dough for such relevant studies. The leading purpose for studying this scientific challenge is to highlight the views, attitudes and elucidations voiced by Prof. Cabej’s numerous writings on particular issues of literature in general, and on oral literature in particular.

This paper demonstrates how kernel density estimation and non-convergent inflection point identification contribute towards the study of wealth disparity. Measuring the dispersion of non-convergent paired inflection points taken from density estimates of the log of net wealth reveals multi-modal sub-distributions. The methodology overcomes shortcomings in the Gini measure of inequality and demonstrates an analytical framework for examining economic inequality. This approach is applied to U.S. data as well as estimating bi-modality within German incomes revealing sub-populations with extreme variations of economic, financial and demographic variables through identifying inflection points as the density is smoothed through increased iterations of the bandwidth.

The paper, using data from the Bank of Italy’s Survey of Household Income and Wealth, estimates the intrahousehold distribution of wealth. On the basis of reconstructed data, a large gap between men and women emerges, greater for financial assets than for real assets and in particular for real estate. This gap, smaller among young people, increases with age; it is decreasing over time, but has remained significant in recent years. Gini concentration indices computed on individual net wealth are far greater than those calculated on household wealth or per capita wealth, which shares wealth equally among household members. The trend in concentration indices, however, does not significantly change. Some regressions suggest that the observed gaps are largely attributable to gender differences in terms of age, educational qualifications, employment and income.

This article is about the metamorphoses of aggregate Indian wealth over fifteen politically transformative decades. Based on a comprehensive new database, I find that wealth-income ratios have fluctuated by large margins in the twentieth century. In emerging India of the twenty first century, wealth is steadily approaching the same disproportionate size (relative to national income) that was seen during sharp economic downturns in interwar colonial India. The long run 1939-2012 U shaped trajectories of wealth-income ratios are reasonably explained by a mid century asset price slowdown and the return of high land shares in national wealth. These results corroborate the secular increase of wealth-income ratios in most large economies since the 1980s. The manifestation of this phenomena appears to be independent of the stage of development

This paper introduces a new long-run dataset based on archival data from historical waves of the Survey of Consumer Finances. The household-level data allow us to study the joint distributions of household income and wealth since 1949. We expose the central importance of portfolio composition and asset prices for wealth dynamics in postwar America. Asset prices shift the wealth distribution because the composition and leverage of household portfolios differ systematically along the wealth distribution. Middle-class portfolios are dominated by housing, while rich households predominantly own equity. An important consequence is that the top and the middle of the distribution are affected differentially by changes in equity and house prices. Housing booms lead to substantial wealth gains for leveraged middle-class households and tend to decrease wealth inequality, all else equal. Stock market booms primarily boost the wealth of households at the top of the distribution. This race between the equity market and the housing market shaped wealth dynamics in postwar America and decoupled the income and wealth distribution over extended periods. The historical data also reveal that no progress has been made in reducing income and wealth inequalities between black and white households over the past 70 years, and that close to half of all American households have less wealth today in real terms than the median household had in 1970.

The recent interest in the taxation of wealth has emanated from the increased wealth concentration and global income inequality in most OECD countries. As largely documented in the literature, both income and wealth inequality has continued to rise significantly in recent decades, motivating Piketty’s proposition of global wealth taxation. This paper critically evaluates the case for a wealth tax in France. We review current discussions on the basics of a good tax system, drawing on the normative tax construct and best practices highlighted in the literature. We do not focus on the responsiveness of tax policy in tackling the evolving inequality of income and wealth. Rather, we emphasize an optimum mix of policy instruments that are effective for varying degree of responsiveness to which policymakers are inclined. We review various arguments to address the social consequences of wealth concentration and how they are better addressed by considering the taxation of wealth and wealth transfer (inheritance). The argument for national wealth tax is flawed given the prevalent occurrence of capital flight. We, however, point out the need for a global wealth tax alongside the implementation of international tax jurisprudence for countries with substantial income inequality and wealth concentration.

Using rich Italian data for the period 2006-2014, we document sizeable gaps between native and immigrant households with respect to wealth holdings and financial decisions. Immigrant household heads hold less net wealth than native along the entire wealth distribution. Immigrant status reduces the likelihood of holding risky assets, housing, mortgages, businesses, and valuables, and it increases the likelihood of fi nancial fragility. Standard regression results are corroborated by a propensity score matching strategy. Years since migration, country of origin, and the pattern of intermarriage also matter. The Great Recession has worsened the condition of immigrants in terms of wealth holdings, home ownership, and fi nancial fragility. Results are unaffected if an immigrant is defi ned as a non-citizen, rather than a foreign-born.

This paper studies a one-period optimal reinsurance design model with n reinsurers and an insurer. The reinsurers are endowed with expected-value premium principles and with heterogeneous beliefs regarding the underlying distribution of the insurer’s risk. Under general preferences for the insurer, a representative reinsurer is characterized. This means that all reinsurers can be treated collectively by means of a hypothetical premium principle in order to determine the optimal total risk that is ceded to all reinsurers. The optimal total ceded risk is then allocated to the reinsurers by means of an explicit solution. This is shown both in the general case and under the no-sabotage condition that avoids possible ex post moral hazard on the side of the insurer, thereby extending the results of Boonen et al. (2016). We subsequently derive closed-form optimal reinsurance contracts in case the insurer maximizes expected net wealth. Moreover, under the no-sabotage condition, we derive optimal reinsurance contracts in case the insurer maximizes dual utility, or in case the insurer maximizes a generic objective that preserves second-order stochastic dominance under the assumption of a monotone hazard ratio.

This note reviews industrial policy in theory and historical practice and makes the case for a fundamental reframing based on the centrality of data to the data-driven digital economy, the various roles that data plays in this economy (as medium of digital transactions, as intangible capital, and as infrastructure of a digitized economy), and the heightened scope for market failure in the data-driven economy. It suggests the following five principles to guide the formation of industrial/innovation policy in the knowledge-based and data-driven digital economy: 1) Participation in the data-driven economy requires access to truly big data. Small open economies will need to scale up data in order to scale up companies. 2) The acceleration of the pace of change and the concentration of wealth in the data-driven economy changes the set of investments with risk-return metrics that the private sector will engage. Public policy must support projects that have social merit but which private capital leaves on the table, and which would be screened out by conventional criteria for industrial policy interventions by the public sector. 3) Foreign direct investment policy must take into account the impact of inward M&A investment on the dynamism of innovation systems, in particular where such takeovers would have anti-competitive effects or materially reduce knowledge spillover benefits within a country’s innovation system. 4) The rent-based business model of the data-driven economy makes asset accumulation essential for national wealth creation. Policy must therefore shift from focussing on activity to building a rent-generating stock of technology assets, including by: (a) adopting a retention policy for domestically-developed knowledge capital developed with public funding support; (b) giving appropriate weight to the implications for a country’s stock of technology assets of FDI, including the potential loss of technology through inward MA and (c) ensuring freedom to operate for domestic technology firms through, for example, a state patent fund to address issues related to patent proliferation. (5) International commitments need to preserve policy space to implement a data strategy to secure a foothold in this emerging economy. As part of their data strategies, countries should assess the market value of data generated in the exercise of public sector governance; put in place procedures to capture it; and use procurement to develop new capabilities in the private sector.

For more than 70 years, a strand of Keynesian thought has maintained that the cure for economic depressions is merely a matter of simple arithmetic. According to these Keynesians, the government need only increase spending by an amount equal to the ratio of the output gap to the fiscal multiplier. Moreover, these Keynesians assert that even wasteful government spending can be desirable because any spending is better than nothing. This simple Keynesian approach fails to account, however, for several significant sources of cost. In addition to the cost of waste inherent in government spending, financing that spending requires taxation, which entails an excess burden. Furthermore, the employment of even previously idle resources involves opportunity costs. In this paper, we subject Keynesian stimulus spending to a benefit-cost test that accounts for waste, labor disutility, capital consumption, and the excess burden of taxation. We calibrate our model by surveying the published estimates of key parameters, including the Keynesian fiscal multiplier. Our results indicate that stimulus spending can successfully generate net wealth, but generally only if the burden of waste is limited to no more than 20 to 30 percent of the overall size of the spending package.

This paper analyzes whether in Italy the price of consumer loans is based on borrower-specific credit risk. This issue is important because mispricing could threaten financial stability through negative effects on lenders’ profitability; risk-based pricing also leads to a more efficient allocation of credit through less rationing and lower prices for low-risk borrowers, who are thereby better able to smooth their consumption, with positive effects on economic growth and financial stability. The evidence available from data collected since 2006 via the Survey on Household Income and Wealth shows that consumer loan pricing has been more risk-based since the 2008 financial crisis. Households’ economic and financial conditions (above all, net wealth, but also number of income earners and education as a proxy for permanent income) become significant and economically important in influencing interest rates during the period 2010–12. These are also the most important drivers of the probability of delinquency on consumer loans; lenders focus on these variables in selecting borrowers. As a consequence of the 2008 financial crisis, lenders have therefore paid more attention to borrowers’ credit risk not only in the selection process, but also in deciding the price of the loan.

Movements in prices depend both on innovations to cashflows and changes in investors' demands, which can be modelled as fluctuations in the cross-sectional distribution of wealth across a fixed set of investment objectives. This paper explores the risk that arises when investors do not have perfect information about the wealth distribution to accurately forecast demand shocks, and, as a result, cannot forecast prices accurately, despite having perfect information about cashflows. To take into account this risk, investors plan their consumption for all realisations of the wealth distribution that are possible according to their subjective beliefs about the wealth distribution. This makes markets highly incomplete, and derivative assets become non-redundant. Derivatives serve a dual purpose: they allow investors to adjust consumption for different realisations of the wealth distribution, and provide information required to implement optimal allocation decisions. Asset prices depend on the sensitivity of stochastic discount factor and assets' payoffs to the wealth distribution, creating differences in expected returns between assets that are unrelated to their cashflow risk. Prices of derivatives deviate from the expected cost of creating synthetic derivatives through dynamic trading, creating apparent mispricings between derivatives and primary assets. The imprecise information about the wealth distribution can also induce a demand for dynamic trading, leaving passive investment strategies no longer optimal. Our results also have implications for arbitrage activity, informational efficiency of prices, and the role of financial innovation.

This study examines the growth and wealth creation impact of government spending in Tanzania during the 1960-2015 period using Autoregressive Distributed Lags (ARDL) modeling for co-integration in a full and sample-splitting framework. The study is motivated by multiple and diverse views in the literature cum increased government spending amid resource shortfall. The study found that Government Spending-Not Surpluses and Deficits-Is What Matters Most. Econometric results favored Government spending on economic services as well as government spending on administration or general public services and social services as good for powering economic growth. Estimated coefficients have shown that in the long-run, these variables have markedly positive influence both on private investment and growth of the economy. Insofar as policy is concerned. Given the current economic setting with private investment being economic growth engine, public policy makers can strategically support various categories of spending that are deemed relevant to stimulate private investment and thereby economic growth. Thus, government spending must or must not to shrink for growth and wealth to increase, instead, there is potential for increasing economic growth and wealth creation firstly, by restructuring government expenditure or getting its composition right through close attention to their elasticities on private investment, and secondly, for government activity to be wealth generating, it must produce more wealth than it consumes.

How does finance evolve in the long run and why? I introduce comprehensive annual financial accounts on the stocks and flows of financial assets for 14 advanced economies since 1850. I use my new data to establish five facts about financial growth: (1) Recent financial growth is not unprecedented. The volume of financial assets more than doubles between 1860 and 1913, stagnates until 1980, and skyrockets after that. (2) The share of debt among financial assets is stable over the past 150 years. Thus global growth of debt can be linked to the growth of finance. (3) Most of the growth of finance industry can be accounted for by corresponding changes in the volume of financial assets, as global unit costs of finance are stable over time. (4) Financial asset-to-wealth ratios are increasing linearly over the past 150 years. This paints a picture of long-run stable financial development, uninterrupted by wars and financial repression.Rising wealth-income ratios can account for the dramatic acceleration of financial growth after 1980. (5) External financing ratios stagnate between 1890 and 1960, shift up between 1960 and 1980, and stabilize afterwards. In the long-run financial formalization dominates: high, but mostly stable external financing ratios and rising financial institutionalization account for the bulk of financial growth since 1850. Put together these five facts suggest a new interpretation of financial growth: Financial growth over the past hundred years is a continuation of pre-WWI trends, only briefly hampered by the destruction of national wealth during the world wars.

The wealth effects on consumption are a subject of continuing interest to economists. The conventional wisdom states that fluctuations in household wealth have caused major fluctuations in economic activity. This study analyses the macroeconomic dynamics of wealth effects in India and examines the nexus between the changes in housing wealth, financial wealth, and consumer spending. Using the quarterly data for the period 2005:1–2016:1, I estimate vector autoregression models and vector error-correction models, relating consumption to income and wealth measures. I find a statistically significant and rather large effect of housing wealth upon household consumption. The results show that (i) wealth effects are statistically significant and comparatively substantial in magnitude (ii) housing wealth effects tend to be greater while stock market wealth effects are considerable (iii) private consumption responses to the shocks to housing market wealth are relatively stronger than to the shocks in stock market wealth. There is a bidirectional causality running from private consumption to the two wealth forms and vice versa. Overall, the private consumption expenditure response to the changes in different wealth forms is observed to be substantial and significant.

Our underlying hypothesis is that technological progress (even neutral) has a big effect on distribution, not only on growth, since rising waves of technical progress cause rising monopoly power. We test it by showing that, since the 1970's, information technology (in short IT) has caused rising monopoly power, which explains rising inequality, slow growth of wages and low level of investment since the 1970's. This monopoly power is legally protected by patent laws, intellectual property rights and by our policy which aims to promote innovations. Our reasoning proceeds in five steps. Step 1 examines surplus wealth - the difference between firm’s wealth (equity and debt) and capital employed. Surplus wealth rose from -$0.59 Trillion in 1974 to $24 Trillion in 2015 which is 82% of total stock market value, reflecting sharply increased monopoly power 1974 - 2015. In step 2 we test the hypothesis surplus wealth is associated with IT transformed firms, establishing an empirical link of IT with monopoly power. Step 3 is theoretical, explaining why theory shows we should expect these results, by studying IT properties that enable erection of barriers to entry and facilitate their maintenance and, once a monopoly power is established, these properties support expansion and consolidation of that power. In step 4 we show why monopoly power causes rising functional inequality and explain that the unique properties of IT also cause rising personal inequality. In step 5 we show that rising monopoly power explains more than rising inequality; it also explains other observed microeconomic phenomena. To carry this out we develop a general equilibrium model where firms have rising monopoly power. For simplicity of analysis monopoly power is exogenous since the link between technology and monopoly power is not essential here. Three independent methods estimate the share of monopoly profits in output to be about 21%-23% in 2015, rising from 0 in early 1980s. Using the model we prove that rising monopoly power lowers permanently equilibrium wage rate, investment, capital stock, output and consumption. In an economy with embodied technical change it also lowers the growth rate of the economy and its equilibrium interest rate.

The aim of the paper is to analyze changes in families’ assets between 2002 and 2012; to measure changes in the degree of inequality; and to identify which social groups (or classes) have gained from these changes, using the decomposition procedure of the Gini concentration ratio proposed by Dagum (1997). The paper introduces two important methodological innovations. First, the definition of household wealth employed here is net wealth minus the value of the household’s home (if owned). Second, we develop a new method for computing the Gini coefficient in presence of negative values, and for decomposing it.

For the first time since independence, in a nation founded in large part on the rejection of a fixed nobility determined by birth and perpetuated by inheritance, America is paving the way for the creation of dynastic family wealth. Abolition or evisceration of the Rule Against Perpetuities in over half the states along with the likely repeal of the federal estate tax mean that there soon will be no obstacles to creating large pools of wealth that will insure lavish incomes to lucky heirs for generations without end. The timing of these legal changes could hardly be worse. Marshaling innovative economic data extending back centuries, Thomas Picketty convincingly argues that the relatively egalitarian incomes enjoyed in developed economies from the end of World War II until around 1980 were an aberration and that we are in the process of returning to the historical norm of much greater income and wealth inequality. The driving force is the return to a world in which the rate of return to capital (r) exceeds the growth rate of national income (g) — another historical norm temporarily abrogated during the 20th century. The wealthy hold an extremely high fraction of national wealth, and when returns to that wealth exceed the growth rate of national income, their relative economic power (and all that goes with that) increases proportionally. The main contribution of this article is, unhappily, to explore reasons that this revival of unending inherited wealth is of even greater concern than previously thought. First and foremost, the savings rate to a significant degree will be set by the dead hand control of those creating perpetual dynastic trust. In order to insure that trust assets keep up with income and beneficiary class growth, settlors will need to mandate very high savings rates for trust income. In the long term excessive savings (in excess of the “golden rule” savings rate), perhaps surprisingly, can actually retard the growth of consumption. In the shorter term, in a well-known phenomenon called the “paradox of thrift,” high savings rates can cause recessions, make them more severe, and increase their duration. Second, beneficiaries of dynastic trusts lack the power to dissipate the pools of family wealth that provide their high incomes. Prodigal children’s spending of principal is a powerful force for reducing inequality and increasing socioeconomic mobility. When not barred from doing so, descendants’ ability to sell trust assets to fund even more lavish lifestyles means that they will buy copious goods and services from those with lower incomes and less wealth. Thus perpetual dynastic family wealth thus imposes real social costs. This article recommends the conventional solution to such negative externalities: calibrated taxation of the anti-social behaviors. Instead of reinstating the Rule Against Perpetuities, this article instead suggests imposing perpetuities taxes on dynastic trusts with rates set, as closely as possible, to equal the costs imposed in terms of lower growth; more frequent and sharper business cycles; higher inequality; and lower socioeconomic mobility.

Are there simple and observable aggregate statistics that might help determine and forecast the degree of wealth inequality? Do they explain the differences in wealth inequality across economies and over time? To answer these questions, we build a general equilibrium, neoclassical growth model, in which the stationary wealth distribution has heavy right tail with the Pareto tail index, Pt. In the simplest cases of the model, the tail index depends on interest rate (r), growth rate (g), aggregate labor income share (EY), and aggregate capital to output ratio, (KY), summarized in a formula Pt = Pt ( r,g,EY,KY) (rather than the simple gap r-g , put forth in Thomas Piketty's “Capital in the 21st century”). In addition, financial development, production technology, corporate and wealth taxes affect the tail index through their effects on these sufficient statistics. When we calibrate the model to the U.S. economy, we find that the model requires significant persistent heterogeneous returns to investment in order to generate the tail index of U.S. wealth distribution. In this calibration, earnings inequality and, to a lesser extent, initial wealth distribution have negligible effects on top end wealth inequality. The transition of the model economy after a uniform wealth destruction shock or changes in corporate tax (but not after a financial deregulation shock) produces the joint dynamics of EY, KY, and wealth inequality experienced in major developed economies after World War II. Lastly, we find empirical evidence for persistent heterogeneous returns in the PSID surveys.

Although tax relief on pensions is a controversial area of government expenditure, this is the first study of the tax effects of a real world defined benefit pension scheme - the Universities Superannuation Scheme (USS). First, we estimate the tax and national insurance contribution (NIC) effects of the rule changes in 2011 on the gross and net wealth of the sponsor, government, and 16 age cohorts of members, deferred pensioners and pensioners. Second, we measure the size of the twelve income tax and NIC payments and reliefs for members and the sponsor, both before and after the rule changes. We find the total subsidy split is roughly: 40% income tax subsidy; 30% member' NIC subsidy; and 30% sponsor NIC subsidy. However government proposals for reform have concentrated exclusively on the income tax relief, neglecting the substantially larger NIC relief, possibly because they have overestimated the size of the income tax relief.

Sequentially examining the full chain of events starting from the default of firms through the fire-sale of goods towards write-offs of bad loans, a new matrix of financial transactions was developed. It was shown that if firms have no equities, the cost of default of those firms is equal zero. Indeed, firms suffer from losses on fire-sales but at the same time, they have a benefit from write-offs of their loans. Whereas, banks incur only the losses on bad loans. This situation may restrain lending to the economy. The considered matrix of financial transactions was incorporated in the transactions-flows matrix of the closed economy consisting of households, firms, and banks. The obtained matrix significantly differs from Goodley’s and Lavoie’s matrix that the flows caused by write-offs of bad loans were taken to flows of incomes and expenses, not to the flows generated by changes in operating assets and liabilities. On the basis of the balance sheet and transactions-flows matrices, a mathematical model of the economy was developed. The used stock-flow consistent framework allows us to be sure that nothing will be lost neither in stocks nor in flows. The model allows studying how such the key parameters as the probability of default, the rate of fire-sales (new injected parameter), recovery rate, interest rates on loans and deposits affect the performance of banks and firms, observing economic dynamics in time under different macroprudential policy rules. Numerical simulation of the model was carried out. Under chosen parameters of the models, the net wealth of firms rises due to the cost of default is zero, while both the net wealth of banks and households at the beginning run high and then falls. Reasons for such behavior of the net wealth are significantly different. The net wealth of banks begins to fall due to the accumulation of credit losses. Whereas, the net wealth of households does begin to fall due to profit paradox, when workers of households have no sufficient money in order to buy out all produced goods, due to there is price markup.

This essay proposes a conceptual framework which shows that the absence of a critical mass of growth-promoting entrepreneurs in many less developing countries is the equilibrium outcome of the existing institutional structure. This institutional structure is characterised by one perverse feature, the attempt of the ruling elite to maximise relative wealth (a substantially part of which is the proceeds of growth-inhibiting rents and the remaining portion from productive activities) as against the maximisation of their absolute stock of wealth. The maximisation of relative share of national wealth by the ruling elite leads to the sub-optimal supply of public goods which can complement productive entrepreneurship and accelerate economic growth. International trade between many developing countries and the former colonizers is structured the same way.

We empirically show across several broad asset classes that sectoral wealth shares do not positively correlate with their risk premia---a first-order prediction of canonical equilibrium models. We then analyze the roles mean-variance and hedging demand play in accounting for sectoral shifts within a two-sector production economy that features imperfect substitutability across goods and demand shocks. With these two features, the model's performance improves, yet still unsatisfactorily accounts for sectoral shifts in wealth shares. We argue that equilibrium models thus face a challenge to explain the cross-sectional evolution of wealth shares and investors' incentives to hold them over time.

We study the impact of sovereign default risk on the private–public savings offset. Using data on 80 countries for the period 1989–2010, we find robust evidence for a U-shaped pattern in the private–public savings offset in foreign currency sovereign credit ratings. While Ricardian Equivalence holds approximately at intermediate levels of sovereign solvency, it breaks down at very low and very high levels of sovereign default risk. In particular, the U-shaped pattern is an emerging market phenomenon as well as confirmed by external public debt, but not domestic public debt. A key result is that in the presence of foreign ownership of sovereign bonds, sovereign default constitutes a net wealth gain for domestic consumers as the present value of saved future taxes outweighs their wealth loss on bond holding. Thus, in times of high default risk, consumers appear to anticipate that the government would rather dilute bondholders than repay sovereign debt using higher taxes.

In many countries, the public would like to know whether their criminal judicial system is more lenient towards the wealthier citizens and if so, by how much. The calculation of the relevant statistics requires knowledge of defendants' wealth, which is not observed in most circumstances. To address this issue, this paper proposes to base the analysis on criminal traffic accidents and use the information on the car of the defendant as the proxy to wealth, in addition to other available proxies based on educational and employment information. Utilizing the multiple proxy approach based on the data from Russia, the analysis finds that the Russian judicial system is more lenient to the defendants with higher wealth. The inequality partially comes from the design of the legal system which provides for certain legal channels that naturally create those disparities. Nevertheless, the inequality persists, even after accounting for those legal channels.

This paper presents the top wealth creators and destroyers in India. I take the change (increase/decrease) in market capitalization as the measure for wealth created and destroyed over a long period 2001-2016. Returns from investments are studied to understand the impact of ‘staying invested long’ on companies. Further I looked at which industry/sector, created wealth and which destroyed and also classify them into different age groups.

Did India's stagnant growth performance until the 1980s increase or decrease the wealth of the elite? Using estate tax data I compute a series which highlights the relative importance of top wealth holders in India between 1961-1986. I find that a combination of policies and shocks were able to significantly depress the personal wealth of the Top 0.1% over this period. A portfolio decomposition by asset categories for the rich reveals that there was a U shaped trend in the average value of movable assets while wealth invested in land significantly declined. Disparity within top wealth groups also follows a shrinking and swelling, consistent with the intervention of the state in private capital. These results have implications for the equalizing forces inherent in tax policy vis-a-vis the rich and the role of the state in regulating capital in poor nations.

Up to now, economics has no mathematically founded concept that allows to distinguish between economic wealth and economic growth (prosperity). Intuitively, wealth is a fixed state and as such constant over time. Growth by itself implies time dependency. By using new economic concepts, we can now confirm our intuition with mathematical formulas. There is a clear quantitative distinction between wealth and growth. This distinction has a large impact on how we have to rebuild economic theories and how to overcome economic crises. An impressive overview on the topic is also given in the video “Quadratic prosperity growth”.

The wealthy hand-to-mouth are households who are poor in liquid wealth (e.g., cash and checking accounts) and rich in illiquid wealth (e.g., housing and retirement accounts), while the poor hand-to-mouth are poor in both wealth. Data from the China Household Finance Survey reveal the following facts about the country’s wealthy hand-to-mouth. First, they represent the majority of the hand-to-mouth households in China. Second, they have different wealth portfolios and demographic features from the poor hand-to-mouth. Last, they have larger consumption responses to income fluctuations than non hand-to-mouth households, after controlling for income, hand-to-mouth status, and other household characteristics.

Research on wealth inequality usually focuses on real and financial assets, while pension wealth – the present value of future pension entitlements from public and company pension schemes – receives little attention. This is astonishing, given that pension plans play an important role for material security and well‐being for an overwhelming part of the population and, thus, should be accounted for in peoples’ wealth portfolios. Using novel data from the Socio Economic Panel (SOEP), we show the incidence, relevance, and distribution of individual pension wealth, net worth, and augmented wealth (the sum of the two) in Germany. Further, we investigate age‐wealth‐profiles and differences between East and West Germany.

There remains a debate about the true level of wealth inequality in the UK, but the trends do not conform to the story of unprecendented or spiralling inequality that are frequently implied in the media. Wealth inequality recently widened for the first time in a decade. However, this was primarily due to housing wealth. A strong focus on inequality within nations obscures the fact that global income inequality has been falling. Net wealth inequality figures at a global level give a misleading picture of poverty and inequality. They fail to account for the demographic composition of the global population and imply, for example, that a rich westerner with large debts but few assets would find themselves at the bottom of the global distribution. The overwhelming focus on summary statistics of income or wealth at a given point in time perpetuates two misconceptions – namely, that a distribution can be easily controlled and that the economy is a zero-sum game. In reality, inequality statistics reflect the results of millions of individual interactions, exchanges, endowments and policies. Affecting a distribution of income or wealth inevitably means interferring with some of these trades or interactions.

This work rehearses the main themes of Piketty’s book and summarizes the debate it triggered. The paper dwells on the rise in the ratio of household wealth to GDP in the rich countries since the 1980s and the role played by the build-up of saving and variations in house and financial asset prices; on the various justifications put forward for the increasing income and wealth inequality that has accompanied the rise in the wealth/income ratio, especially in the US and Britain; on the relationship between the rate of return on capital and the economic growth rate; on the ties between rising income inequality and the financial crisis of 2007-08; on the feasibility of Piketty’s proposals for higher taxation of top incomes and a progressive global tax on net household wealth; and on the progress that has been made in the US and Europe in exchanging information on citizens’ income and foreign assets.

This paper presents new estimates of wealth inequality in Sweden during 2000–2012, linking wealth register data up to 2007 and individually capitalized wealth based on income and property tax registers for the period thereafter when a repeal of the wealth tax stopped the collection of individual wealth statistics. We find that wealth inequality increased after 2007 and that more unequal bank holdings and apartment ownership appear to be important drivers. We also evaluate the performance of the capitalization method by contrasting its estimates and their dispersion with observed stocks in register data up to 2007. The goodness-of-fit varies tremendously across assets and we conclude that although capitalized wealth estimates may well approximate overall inequality levels and trends, they are highly sensitive to assumptions and the quality of the underlying data sources.