Secular Changes in Wealth Inequality and Inheritance

Abstract

Data suggest the distribution of wealth among households in the United States and the United Kingdom has become more equal over the last century - though the pattern may have reversed recently. This paper shows that a model in which all households save for life-cycle reasons and some for dynastic purposes as well offers a possible explanation: the model predicts rising cross-sectional equality of wealth when longevity increases. In terms of recent changes, the model suggests that expansion of social security programs and government debt can lead toward more wealth inequality, and that slower growth may do the same.