Detecting a Robust Change in Wealth Concentration without the Knowledge of the Wealth Distribution

Abstract

The paper focuses on the concentration of wealth defined as the expected present value of lifetime resources. We propose an indirect but robust method that detects a change in the concentration of wealth when the full stream of income receipts along the life cycle is unknown. We rely on the consumption distribution at a given period. We exploit the key property of concavity of consumption with respect to wealth to infer a change in wealth concentration from the one in consumption concentration. An application to American data is provided which illuminates the main changes occurred in wealth concentration during the twenty past years.