Matthieu Gomez “Asset-Price Redistribution” – Clara Martinez Toledano (Imperial) & Ian Martin (LSE)

Abstract: Over the past forty years, many advanced countries have seen large increases in aggregate wealth-to-income ratios and top wealth inequality. Empirically, a large fraction of these trends is due to changing asset prices, and in particular changing asset valuations rather than cashflows. In this paper, we quantify the welfare effects of such asset-price changes. To do so, we develop a sufficient statistic approach and implement it using panel microdata covering the universe of Norwegians from 1994 to 2015; a period marked by declining interest rates and rising house prices. We find that rising asset valuations have generated a large welfare gains and losses (in units of consumption). They have redistributed welfare from the young towards the old, and from the poor towards the wealthy.