Thomas Blanchet: Uncovering the Dynamics of the Wealth Distribution

  • From Forum New Economy
  • Reading duration 1 min

Thomas Blanchet uncovers the true drivers of rising wealth inequality around the globe.

In many countries around the world, wealth inequality has been on the rise. However, the exact drivers of wealth inequality and their relative weights are not always clear.

Using a novel stochastic model, economist Thomas Blanchet developed a method that effectively separates different effects on wealth development, including mobility, savings, labor income, rates of return, demography and inheritance.

Blanchet applies this approach to estimate the wealth distribution in the United States since 1962, using historical data on income, wealth, and demography. The findings reveal that the primary drivers behind the rise of the top 1% wealth share since the 1980s are, in decreasing order of importance, higher savings at the top, greater rates of return on wealth (primarily through capital gains), and increased inequality in labor income. Additionally, the model is utilized to examine the impacts of wealth taxation. In the benchmark calibration, the optimal wealth tax rate at the top, maximizing revenue, is relatively high (around 12%), but the actual revenue collected from the tax is considerably lower than in a static scenario.

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