Looking for the missing rich: tracing the top tail of the wealth distribution
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Looking for the missing rich: tracing the top tail of the wealth distribution Stefan Bach1,2 · Andreas Thiemann3
· Aline Zucco1
Published online: 8 November 2019 © The Author(s) 2019
Abstract We analyse the top tail of the wealth distribution in France, Germany, and Spain using the first and second waves of the Household Finance and Consumption Survey (HFCS). Since top wealth is likely to be under-represented in household surveys, we integrate big fortunes from rich lists, estimate a Pareto distribution, and impute the missing rich. In addition to the Forbes list, we rely on national rich lists since they represent a broader base of the big fortunes in those countries. As a result, the top 1% wealth share increases notably for the three selected countries after imputing the top wealth. We find that national rich lists can improve the estimation of the Pareto coefficient in particular when the list of national USD billionaires is short. Keywords Wealth distribution · Missing rich · Pareto distribution · HFCS JEL Classification D31 · C46 · C81
1 Introduction Rising inequality in income and wealth is gaining increased attention in both public and academic debate. The widespread discussion triggered by Piketty’s (2014) book, Capital in the Twenty-First Century, focuses on concentration at the top and
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10797019-09578-1) contains supplementary material, which is available to authorized users.
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Andreas Thiemann [email protected] Stefan Bach [email protected] Aline Zucco [email protected]
1
German Institute for Economic Research (DIW Berlin), Berlin, Germany
2
University of Potsdam, Potsdam, Germany
3
European Commission, Joint Research Centre (JRC), Seville, Spain
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the underlying trends in modern capitalism. Economists and policy makers alike are aware of increasing heterogeneity in income and wealth, along with its consequences for financial stability, savings and investment, employment, growth, and social cohesion. Against the backdrop of tax systems being less progressive over the last decades and rising public debt following the 2008 financial crisis, some politicians are considering higher taxes on capital income and top wealth (Förster et al. 2014; Saez and Zucman 2019). However, the lack of precise information about wealth concentration at the top of the distribution makes it difficult to assess the economic impact of such tax reforms. In this paper, we rely on an approach suggested by Vermeulen (2018), which combines household survey data with rich lists to jointly estimate a Pareto distribution for the top tail to adjust the top wealth distribution in France, Germany, and Spain. In particular, our main contribution is to investigate how the use of national rich lists instead of the Forbes list improves top tail estimations. We derive an adjusted wealth distribution to better account for the wealth at the very top, which wealth surveys do usually not cover
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