How Wealthy are the Rich?

Faculty/Professorship: International Economics  
Author(s): Schulz, Jan  ; Milaković, Mishael  
Publisher Information: Bamberg : Otto-Friedrich-Universität
Year of publication: 2022
Pages: 24
Source/Other editions: Review of Income and Wealth, (2021), 24 S. - ISSN: 0034-6586
is version of: 10.1111/roiw.12550
Year of first publication: 2021
Language(s): English
Licence: Creative Commons - CC BY - Attribution 4.0 International 
URN: urn:nbn:de:bvb:473-irb-546691
Underreporting and undersampling biases in top tail wealth, although widely acknowledged, have not been statistically quantified so far, essentially because they are not readily observable. Here we exploit the functional form of power law-like regimes in top tail wealth to derive analytical expressions for these biases, and use German microdata from a popular survey and rich list to illustrate that tiny differences in non-response rates lead to tail wealth estimates that differ by an order of magnitude, in our case ranging from 1 to 9 trillion euros. Underreporting seriously compounds the problem, and we find that the estimation of totals in scale-free systems oftentimes tends to be spurious. Our findings also suggest that recent debates on the existence of scale- or type-dependence in returns to wealth are ill-posed because the available data cannot discriminate between scale- or type-dependence, on one hand, and statistical biases, on the other hand. Yet both economic theory and mathematical formalism indicate that sampling and reporting biases are more plausible explanations for the observed data than scale- or type-dependence.
GND Keywords: Vermögensverteilung; Qualitatives Wachstum; Stochastik
Keywords: wealth inequality, stochastic growth, differential non-response, Hill estimator, tail index bias
DDC Classification: 330 Economics  
650 Management & public relations  
RVK Classification: QH 237     QK 800   
Type: Article
Release Date: 18. July 2022

File SizeFormat  
fisba54669.pdf439.13 kBPDFView/Open