Wealth distribution and social mobility in the US: A quantitative approach

We quantitatively identify the factors that drive wealth dynamics in the U.S. and are consistent with its skewed cross-sectional distribution and with social mobility. We concentrate on three critical factors: i) skewed earnings, ii) differential saving across wealth levels, and iii) stochastic idiosyncratic returns to wealth. All of these are fundamental for matching both distribution and mobility. The stochastic process for returns which best fits the cross-sectional distribution of wealth and social mobility in the U.S. shares several statistical properties with those of the returns to wealth uncovered by Fagereng et al. (2017) from tax records in Norway.