US. This phenomenon is clearly starker in the rural areas than in the urban areas of SSA: we find that the top 1% income-richest households in rural and urban SSA, respectively, hold 4% of total wealth in rural areas and 11% in urban areas, while this figure is 26% in the United States.<sup>3</sup> That is, the income-richest households in rural SSA accumulate only as much as 15% of the share of total wealth that the income-richest US households are able to accumulate in terms of US wealth. The equivalent figure for urban areas in SSA is 46%, which also suggests a reduced ability to accumulate wealth in SSA than in the US. The behavior of the joint density of income and wealth strengthens this message as we find significant positive correlations between income and wealth only for the top 20% of the income distribution. The correlation is stronger in urban areas, 0.30, than in rural areas, 0.12, while this figure is much larger, 0.57, for the entire US economy.

The direct exploration of household saving provides further insights. We find that only households in the top 1% and 5% of the income distribution in rural and urban areas are able to save, and they do so with high saving rates similar to those of the top income earners in the US. One way to relate this finding (i.e., saving rates similar to those in the US for the top income earners in SSA) with the result discussed in the previous paragraph (i.e., lower share of total wealth held by the top income earners in SSA than in the US) is through the lesser persistence of high income in SSA than in the US. Indeed, we find that within a span of four years, 51% of rural households at the top quintile of the income distribution fall to a lower quintile, as do 46% of urban households, while this figure is only 23% in the US.<sup>4</sup> That is, households in the top quintile of the income distribution in SSA leave that quintile twice as fast as their counterparts in the US, and this downward mobility occurs somewhat faster in rural than urban areas. This lesser persistence of high income — and hence, of saving — helps to explain the low transmission from income to wealth and the low wealth accumulation in SSA compared with that in the US, even for the top income earners who actually save.

Interestingly, despite the generalized inability to save that we find in SSA, we find a concurrent lower transmission from income to consumption inequality in SSA than in the United States. Precisely, economy-wide, the inequality of consumption is 47% that of income (in terms of the variance in logs). The figure for the United States is larger, roughly 55% (Blundell et al. (2008)). Furthermore, the joint density of consumption and income implies a correlation between consumption and income of 0.30 in rural areas and 0.53 in urban areas, suggesting that this insurability of consumption is larger in rural areas than in urban areas. Combining our two findings — lower transmission from income inequality to both wealth inequality and consumption

> 3For brevity, the precise numbers reported in the introduction refer to Malawi.

> 4We use data from Uganda for these mobility statistics, as it has a panel component not available for Malawi.

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