Luis de Guindos: Gabriel Zucman's contribution to research on
wealth inequality and the redistributive effects on globalization
Remarks by Luis de Guindos, Vice-President of the European Central Bank, on the occasion of
the award of the Bernácer Prize to Professor Gabriel Zucman, Madrid, 11 October 2019.
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It is a pleasure for me to celebrate with you the award of the 2019 Bernácer Prize to Gabriel
Zucman, Assistant Professor of Economics at the University of California, Berkeley. Gabriel's
creative work on measuring household wealth over time and across countries and his studies on
the effects of taxation and globalisation on the accumulation of wealth have become increasingly
influential among academic economists and policymakers. He is a deserved recipient of the
Bernácer Prize, which is awarded each year to an outstanding young European economist
working in the fields of macroeconomics and finance.
This year's prize has been awarded specifically for Gabriel's "influential research on wealth
inequality and the redistributive effects of globalisation". Gabriel, together with his co-authors
Thomas Piketty and Emmanuel Saez, has been one of the pioneers in this field, showing us how
to use various data sources - aggregate sectoral accounts, household surveys, fiscal data,
historical administrative data and unofficial records - to estimate the evolution and determinants
of the wealth distribution over centuries. Such a long time range is important, as many of the
movements in wealth inequality are very gradual, which means that these changes can only be
estimated reliably once enough data are available. At the same time, retrieving historical
information on wealth poses multiple challenges. First, data on household wealth are much
scarcer than, say, data on household income. Second, the wealth distribution is heavily skewed
toward its top tail, such that relatively few households hold a large fraction of aggregate wealth in
the economy. Consequently, to be able to measure wealth inequality, it is important that we
include information about the very richest households. Third, and especially for the richest
households, one should account for all assets, including those held abroad, which tend to be
more difficult to trace.
A key approach used by Gabriel to overcome these challenges is the "income capitalisation
method", which uses fiscal data on capital income to estimate the wealth distribution. Although
not always easily accessible, fiscal data are available for several decades and also cover the
richest households. The method is therefore useful in estimating the evolution of the wealth
distribution over long periods of time. Using this approach, Gabriel has provided us with
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estimates of the top wealth shares in the United States over the last century. This influential
work shows that wealth concentration in the United States was high at the beginning of the 20th
century, fell from 1929 to 1978, and has continuously increased since then. The substantial
increase in wealth inequality since the early 1980s has been driven by the very richest
households (the top 0.1% of the wealth distribution and above).
Gabriel then used the estimates of the wealth distribution to construct "distributional national
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accounts" for the United States. These accounts combine tax, survey and national accounts
data to estimate the distribution of national income across households. Importantly, in contrast to
previous estimates which only capture the income recorded in aggregate statistics in an
incomplete fashion, distributional national accounts consistently cover all national income in
aggregate data. In addition, this work provides estimates for both pre-tax and after-tax income,
documenting the extent to which the tax system has dampened the increase in US income
inequality over the past few decades.
Gabriel's findings for the United States have recently been extended to many other countries,
including large emerging economies, in the "World Inequality Database", which provides data on
household inequality calculated using a common and consistent methodology. The time series in
the World Inequality Database are the result of an ingenious combination of various data
sources, including survey data, tax data and, sometimes, information from named lists of
wealthy individuals to improve estimates of the very top of the wealth distribution.
The World Inequality Database has substantially benefited the academic community by providing
easily accessible data, and it has spurred a wider debate about the causes and consequences
of inequality. For example, the database has documented diverse trends in the dynamics of
income and wealth inequality since 1980 across countries, suggesting national institutions play a
key role in affecting inequality. The data show that in recent decades incomes of the poorer half
of the global population grew significantly thanks to high growth in Asia, in particular in China and
India.
Gabriel's extensive work measuring the distribution of wealth and income has allowed us to think
more rigorously and in quantitative terms about the main determinants of changes in household
wealth distribution.
At this point, allow me to stress that this topic is especially important in the euro area, where the
public debate on the expansionary stance of monetary policy is sometimes caricatured in terms
of a clash between "winning" borrowers and "losing" savers. This representation is simplistic
because it ignores the various other channels through which monetary policy affects household
wealth, including its indirect impact on incomes and employment. In fact, new approaches to
modelling and analysing household heterogeneity have recently stressed the importance of these
indirect channels of monetary transmission, which operate through the responses of higher
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wages and employment to monetary easing. A key quantitative finding of that literature is that
this indirect income channel disproportionately stimulates incomes and consumption in the lower
part of the distribution.
In line with this work, internal ECB research finds that low short rates do hurt "savers", i.e.,
households owning non negligible amounts of liquid assets, via a direct effect - that is, via the
reduction in their income from those assets. Low short rates, however, also benefit savers, like
all other households, via an indirect effect - that is, the reduction in their unemployment rate and
the increase in their labour income. The indirect effect dominates from a quantitative perspective.
In addition, through the reduction of the unemployment rate of poorer households, the indirect
effect reduced income inequality. On the whole, these results support the finding that monetary
policy in recent years benefited most households and did not contribute to an increase in wealth,
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income or consumption inequality. This debate illustrates that we need increasingly precise
ways to measure wealth in order to foster a more informed public debate about the effects of
various policies and other factors on the distribution of wealth. As you may know, the
Eurosystem has for many years contributed to the measurement and analysis of the wealth
distribution and its components across countries by collecting and providing the Household
Finance and Consumption Survey micro data.
My overview of Gabriel's work has been quite selective, focusing on topics related to the
measurement and determinants of inequality in household wealth, but Gabriel has also worked
on an impressive range of other areas, such as the substitution between illegal tax evasion and
legal tax avoidance, effects of wealth taxes on household saving and the role of tax havens and
tax competition in profit-shifting by large multinational firms.
Dedicated research to measure inequality around the globe and the analysis of its root causes is
an established priority among major institutions. This is an important development. We should
however not lose focus. Despite impressive progress in combating poverty over the past
decades, poverty persists at unacceptable levels.
That's why, in face of a global economic slowdown, economic policy needs to ensure that people
continue to move out of poverty in the years to come.
Please join me in congratulating Gabriel on being awarded this year's Bernácer Prize. Gabriel, I
wish you continued success and look forward to following your future work.
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Saez, E. and Zucman, G. (2016), "Wealth Inequality in the United States since 1913: Evidence from Capitalized
Income Tax Data", The Quarterly Journal of Economics, Vol. 131, No 2, pp. 519-578.
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Piketty, T., Saez, E. and Zucman, G. (2018), "Distributional National Accounts: Methods and Estimates for the
United States", The Quarterly Journal of Economics, Vol. 133, No 2, pp. 553-609.
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For modelling of monetary transmission with household heterogeneity, see Kaplan, G., Moll, B., and Violante, G.
L. (2018), "Monetary Policy According to HANK", American Economic Review, Vol. 108, No 3, 697-743.
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See Ampudia, M., Georgarakos, D., Slacalek, J., Tristani, O., Vermeulen, P., and Violante, G. L. (2018), "Monetary
Policy and Household Inequality", ECB Working Paper Series, No 2170, European Central Bank.