Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/181307 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7107
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
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.
Subjects: 
wealth inequality
returns to wealth
financial wealth
net worth
heterogeneity
intergenerational mobility
JEL: 
D31
D91
E21
E24
G11
Document Type: 
Working Paper
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