THE ACCUMULATION OF HOUSEHOLD WEALTH OVER THE LIFE‐CYCLE: A MICRODATA ANALYSIS

Edward Wolff

    Research output: Contribution to journalArticle

    Abstract

    In this paper, I investigate the validity of the Modigliani‐Brumberg (M‐B) model as an explanation of the variation of wealth holdings among households. The model as such, even with the inclusion of estimates of household lifetime earnings, explains only a minute portion of the variation in household wealth. Indeed, for certain groups such as non‐white, rural residents, and the low educated, the coefficients of the regression model are insignificant. Moreover, when the top wealth holders are removed from the sample and when non‐cash financial and business assets are eliminated from the household portfolios, the explanatory power of the M‐B model increases markedly. Essentially, the validity of life‐cycle wealth accumulation models must be restricted to the white, urban, educated middle classes and their accumulation of housing, durables, and cash. The rich have very different motives for saving and very different sources of saving, while the poor do not earn sufficient income over their lifetime to accumulate any non‐negligible wealth.

    Original languageEnglish (US)
    Pages (from-to)75-96
    Number of pages22
    JournalReview of Income and Wealth
    Volume27
    Issue number1
    DOIs
    StatePublished - 1981

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    Micro data
    Life cycle
    Household wealth
    Wealth
    Household
    Regression model
    Cash
    Coefficients
    Durables
    Wealth accumulation
    Household portfolios
    Inclusion
    Residents
    Assets
    Income
    Middle class

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    THE ACCUMULATION OF HOUSEHOLD WEALTH OVER THE LIFE‐CYCLE : A MICRODATA ANALYSIS. / Wolff, Edward.

    In: Review of Income and Wealth, Vol. 27, No. 1, 1981, p. 75-96.

    Research output: Contribution to journalArticle

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