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Andreas Fagereng, Luigi Guiso, Mr. Davide Malacrino, and Luigi Pistaferri
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. First, during our sample period individuals earn markedly different average returns on their financial assets (a standard deviation of 14%) and on their net worth (a standard deviation of 8%). Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points - and by 17 percentage points when the same exercise is performed for the return to net worth. Fourth, wealth returns exhibit substantial persistence over time. We argue that while this persistence partly reflects stable differences in risk exposure and assets scale, it also reflects persistent heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.
Andreas Fagereng, Luigi Guiso, Mr. Davide Malacrino, and Luigi Pistaferri

usually associated with higher risk tolerance and idiosyncratic risk (entrepreneurs tend to hold very high stakes in their own company - see e.g., Heaton and Lucas, 2000 ; Moskowitz and Vissing-Jorgensen, 2002 ), rather than with higher than average discount factors. An alternative route followed in an attempt to match the thick tail in the distribution of wealth has been to explicitly allow for entrepreneurship and idiosyncratic returns to investment, as in Quadrini (2000) and Cagetti and De Nardi ( 2009 ; 2006 ). While heterogeneity in returns to wealth can be

Andreas Fagereng, Luigi Guiso, Mr. Davide Malacrino, and Luigi Pistaferri

Front Matter Page WP/18/171 IMF Working Paper Heterogeneity and Persistence in Returns to Wealth By Andreas Fagereng, Luigi Guiso, Davide Malacrino and Luigi Pistaferri INTERNATIONAL MONETARY FUND Front Matter Page © 2018 International Monetary Fund WP/18/171 IMF Working Paper Research Department Heterogeneity and Persistence in Returns to Wealth Authorized for distribution by Romain Duval July 2018 I. TABLE OF CONTENTS I. INTRODUCTION II. DATA SOURCES AND VARIABLE DEFINITION A. Administrative

parents with their children, hence offering a valuable opportunity to examine intergenerational patterns in returns to wealth. Such thorough data on wealth are extremely rare. Even though administrative data on income are available in many countries, it is much less common for authorities to collect data on wealth, given how few countries collect wealth taxes. Because of the lack of direct wealth measurement, researchers have relied on imputation methods to measure inequality. For example, the so-called capitalization approach relies on imputing individual wealth

Mr. Taehoon Kim
The US economy is often referred to as the “banker to the world,” due to its unique role in supplying global reserve assets and funding foreign risky investment. This paper develops a general equilibrium model to analyze and quantify the contribution of this role to rising wealth concentration among American households. I highlight the following points: 1) financial globalization raises wealth inequality in a financially-developed economy initially due to foreign capital pressing up domestic asset prices; 2) much of this increase is transitory and can be reversed as future expected returns on domestic assets fall; and 3) despite the low-interest-rate environment, newly accessed foreign capital provides incentives for affluent households to reallocate wealth toward risky assets while impoverished households increase their debt. Wealth concentration ensues only if this rebalancing effect is large enough to counteract diminished return on domestic assets. Quantitative analysis suggests that global financial integration alone can account for a third to a half of the observed increase in the current top one percent wealth share in the US, but indicates a possible reversal in the future.
Mr. Taehoon Kim

University Press , 2011 . A. Fagereng , L. Guiso , D. Malacrino , and L. Pistaferri , “ Heterogeneity and Persistence in Returns to Wealth ,” IMF Working Papers , 2018 . E. F. Fama and K. R. French , “ The Equity Premium ,” The Journal of Finance , Vol. 57 , No. 2 , pp. 637 – 659 , 2002 . J. Ferna´ndez-Villaverde , S. Hurtado , and G. Nuno , “ Financial Frictions and the Wealth Distribution ,” 2018 . D. Furceri and P. Loungani , “ Capital Account Liberalization and Inequality ,” IMF Working Papers