Wealth Inequality: Opportunity or Unfairness?

53 Pages Posted: 8 Jun 2021 Last revised: 22 Apr 2022

See all articles by Michael Haliassos

Michael Haliassos

Goethe University Frankfurt - Faculty of Economics and Business Administration; CEPR; NETSPAR; Goethe University Frankfurt - Institute for Monetary and Financial Stability (IMFS)

Thomas Jansson

Sveriges Riksbank - Research Division

Yigitcan Karabulut

Frankfurt School of Finance & Management; CEPR

Date Written: April 18, 2022

Abstract

This paper presents evidence of a new propagation mechanism for wealth inequality, based on differential responses, by education, to greater inequality at the start of economic life. It is motivated by a novel positive cross-country relationship between wealth inequality and perceptions of opportunity and fairness, which holds only for the more educated. Using unique administrative micro data and a quasi-field experiment of exogenous allocation of households, the paper finds that exposure to a greater top 10\% wealth share at the start of economic life in the country leads only the more educated placed in locations with above-median wealth mobility to attain higher wealth levels and position in the cohort-specific wealth distribution later on. Underlying this effect is greater participation in risky financial and real assets and in self-employment, with no evidence for a labor income, unemployment risk, or human capital investment channel. This differential response is robust to controlling for initial exposure to fixed or other time-varying local features, including income inequality, and consistent with self-fulfilling responses of the more educated to perceived opportunities, without evidence of imitation or learning from those at the top.

Keywords: Household finance, wealth inequality, propagation of inequality, education, opportunity, refugees.

JEL Classification: G5, E21, E44, D31, D1

Suggested Citation

Haliassos, Michael and Jansson, Thomas and Karabulut, Yigitcan, Wealth Inequality: Opportunity or Unfairness? (April 18, 2022). Available at SSRN: https://ssrn.com/abstract=3862010 or http://dx.doi.org/10.2139/ssrn.3862010

Michael Haliassos (Contact Author)

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
PF H32
Frankfurt am Main, D-60323
Germany

CEPR

London
United Kingdom

NETSPAR ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Goethe University Frankfurt - Institute for Monetary and Financial Stability (IMFS) ( email )

Theodor-W.-Adorno-Platz 1
Frankfurt, 60323
Germany

Thomas Jansson

Sveriges Riksbank - Research Division ( email )

S-103 37 Stockholm
Sweden

Yigitcan Karabulut

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

CEPR ( email )

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
172
Abstract Views
710
rank
235,862
PlumX Metrics