Counterfactual Wealth Distributions

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Abstract:  This paper develops a tractable framework to study theoretically and empirically the effect of counterfactuals on the wealth distribution. More precisely, I express the first-order effect of policies on the wealth distribution  in terms of a set of sufficient statistics, which can be easily mapped to the data.  Importantly, this framework does not require the wealth distribution to be in a steady-state nor to obey a particular  shape (e.g. Pareto). I use this framework to revisit existing issues in the wealth inequality literature, such as the speed of transition dynamics, the effect of asset prices, and capital taxation.