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The Accumulation Of Household Wealth Over The Life‐Cycle: A Microdata Analysis

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  • Edward N. Wolff
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.

Suggested Citation

  • Edward N. Wolff, 1981. "The Accumulation Of Household Wealth Over The Life‐Cycle: A Microdata Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 27(1), pages 75-96, March.
    • Handle: RePEc:bla:revinw:v:27:y:1981:i:1:p:75-96
    DOI: 10.1111/j.1475-4991.1981.tb00193.x
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    Cited by:

    1. Michelle Maroto, 2018. "Saving, Sharing, or Spending? The Wealth Consequences of Raising Children," Demography, Springer;Population Association of America (PAA), vol. 55(6), pages 2257-2282, December.
    2. Robert B. Williams, 2017. "Wealth Privilege and the Racial Wealth Gap: A Case Study in Economic Stratification," The Review of Black Political Economy, Springer;National Economic Association, vol. 44(3), pages 303-325, December.
    3. Mauro Baranzini, 2005. "Modigliani's life-cycle theory of savings fifty years later," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 109-172.
    4. Jörg Bibow, 2010. "Alternative Strategien der Budgetkonsolidierung in Österreich nach der Rezession," IMK Studies 03-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    5. Lucie Schmidt & Purvi Sevak, 2006. "Gender, Marriage, And Asset Accumulation In The United States," Feminist Economics, Taylor & Francis Journals, vol. 12(1-2), pages 139-166.
    6. Iacopo Odoardi & Carmen Pagliari, 2020. "Household Wealth as a Factor of Economic Growth: A Case Study of Italy," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 14(3), September.
    7. Richard H. Steckel & Jayanthi Krishnan, 1992. "Wealth Mobility in America: A View from the National Longitudinal Survey," NBER Working Papers 4137, National Bureau of Economic Research, Inc.
    8. Ole Hexel & Diego Alburez-Gutierrez & Emilio Zagheni, 2024. "Family structure and bequest inequalities between black and white households in the United States, 1989-2022," MPIDR Working Papers WP-2024-008, Max Planck Institute for Demographic Research, Rostock, Germany.
    9. Mauro Baranzini, 2005. "Modigliani's life-cycle theory of savings fifty years later," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 109-172.
    10. Burger, Ronelle & Booysen, Frikkie & Berg, Servaas van der & Maltitz, Michael von, 2006. "Marketable Wealth in a Poor African Country," MPRA Paper 9063, University Library of Munich, Germany.
    11. Korom, Philipp, 2017. "Ungleiche Mittelschichten: Über Unterschiede im Immobilienvermögen und im Erbe innerhalb der Mitte Deutschlands," MPIfG Discussion Paper 17/14, Max Planck Institute for the Study of Societies.

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