Saving Rate Heterogeneity under Wealth Rank Mobility

Abstract

Under wealth rank mobility, each wealth decile has three saving rates. In the Panel Study of Income Dynamics, the saving-wealth gradient is negative ranked on start wealth, near zero among immobile households and positive ranked on end wealth. The top wealth decile saves 2.6% of lagged wealth a year ranked on start wealth, 7.9% among immobile households and 15.4% ranked on end wealth. Distributional national accounts measure saving from wealth ranked on end wealth and lagged wealth ranked on start wealth. The synthetic rate is 5.7% of lagged wealth and understates the saving rate ranked on end wealth by 63%.