Keeping up with the Joneses in McMansions: Changes in Wealth Inequality between College and High-School Graduates

This paper analyzes the changes in wealth inequality between college graduates and high-school graduates between 1989 and 2007. The college/high-school net worth gap first narrowed from 1989 to 1995 but then increased thereafter. The wealth gap between the two groups reflects the earnings gap as the evolution in the wealth gap follows the changes in the college premium in income during the sample period. Many “stylized facts” about earnings inequality are also found in dynamics of wealth inequality ---within group inequality increased substantially, particularly among college graduates, and an increase in residual dispersion accounts for a considerable fraction in widening wealth inequality.