Wealth and Inequality

The analysis of wealth inequality is less developed than that about labour income inequality. This difference is due to a series of reasons. First, wealth is more difficult to define than “simple” labour income, and a debate on which elements are properly definable as wealth is still without any definite conclusions. Second, wealth is more difficult to account for because administrative data on labour incomes of different types are reasonably developed and available to researchers, while data on wealth are more difficult to collect. Third, as wealth is typically concentrated in the top 10% (or even in the top 1%) of the population, the methods to account for wealth through, for instance, the capitalised income method normally fails to capture the fat tails of the skewed distribution. However, as wealth, differently from income, is accumulated through time, even a constant income differential increases the wealth differential: thus, it is possible to have increasing wealth inequality in presence of constant (or even decreasing) income inequality.