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Friday seminar - Luigi Pistaferri, (Stanford University), Assortative Mating and Wealth Inequality

Luigi Pistaferri, Stanford University


Population data on capital income and wealth holdings for Norway allow us to measure asset positions and wealth returns before individuals marry and after the household is formed. Using these data we establish a number of novel facts. First, there is assortative mating on the bases of spouses own wealth. Second, assortative mating on own wealth dominates, and in fact statistically annihilates, assortative mating on parental wealth. Third, there is evidence that people match also on their personal returns to wealth. Finally, post-marriage returns on family wealth are largely explained by the return of the spouse with the highest pre-marriage return. This suggests that family wealth is largely managed by the spouse with the highest potential to grow family wealth. We use simulations to evaluate the effects of assortative mating on wealth, assortative mating on returns, and post-marriage allocation of wealth management tasks on wealth inequality and wealth concentration. Assortative mating on wealth is the dominant force explaining wealth concentration at marriage. Returns heterogeneity resulting from mating on returns and post-marriage allocation of wealth management between spouses plays a dominant role for explaining changes in wealth inequality as couples move through their life cycle.

Dept. of Finance

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