Wealth Inequality: The Roles of Physical and Human Capital
Date
2025-03-27
Authors
Soborowicz, Levi
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Palgrave Macmillan, Cham
Abstract
Human capital plays a major role in the asset growth of households and countries, but it has not typically been included in measuring wealth inequality. Instead, inequality measures have focused solely on holdings of physical assets. Nevertheless, for most households, stocks of human capital represent a majority of their wealth, and this is particularly true for households at the lower tail of the wealth distribution. This is also true for the young, who are human capital rich but poor in physical capital. The exclusion of human capital from analysis of wealth inequality is particularly surprising as returns to schooling have played a major role in explaining rising income inequality in industrialized economies since the 1980s. This study examines how including human capital affects measures of wealth inequality over time, between racial groups, between education levels, and between older and younger birth cohorts. We find that wealth inequality is less extreme and grows more slowly when human capital wealth is included.
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Book chapter
Comments
Jel Classification: D31, E20, E32, G51, J24
This is a manuscript of a chapter published as Orazem, P.F., Soborowicz, L. (2025). Wealth Inequality. In: The Palgrave Handbook of Global Social Problems. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-68127-2_531-1
This is a manuscript of a chapter published as Orazem, P.F., Soborowicz, L. (2025). Wealth Inequality. In: The Palgrave Handbook of Global Social Problems. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-68127-2_531-1