Wealth Inequality: Opportunity or Unfairness?

This paper presents evidence for a new propagation mechanism of wealth inequality. Motivated by cross-country survey evidence, it uses unique administrative microdata and a quasifield experiment of exogenous assignment to test the hypothesis that, in the presence of significant opportunities for wealth mobility, the more educated respond to greater wealth inequality at the start of economic life by taking more financial, real, and self-employment risks and achieving higher wealth, thereby propagating wealth inequality. We find no evidence for alternative channels of propagation through labor income, unemployment risk, or human capital investment, nor for inspiration, imitation, or learning from the rich.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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