DTA

Corso Ordinario Secondo Livello

DALLE LUCHE, MATTEO

etd-05222024-205904

Heterogeneous returns on wealth in the Italian economy: the distributional consequences of differential households’ savings and investment choices

Classe Scienze Sociali

SCIENZE ECONOMICHE E MANAGERIALI - SCIENZE ECONOMICHE E MANAGERIALI

Tutor Prof. FAGIOLO, GIORGIO
Relatore Prof. ROVENTINI, ANDREA
Presidente Prof. IRALDO, FABIO
Membro Prof.ssa CHIAROMONTE, FRANCESCA
Membro Prof.ssa ANNUNZIATA, ELEONORA
Membro Prof. BELLINI, NICOLA

• capital income inequality
• wealth distribution
• household finance
• financial crises

14/06/2024;

completa

The distribution of rates of return on personal wealth and how they contribute in shaping capital income<br> inequality is an issue of recent investigation in the economic literature. This work constitutes an attempt<br> to conservatively estimate rates of return on wealth within the households sector, to be used to update<br> the current evidence over the distribution of capital income in Italy on augmented survey data spanning<br> between 2004 and 2015.<br> Pivoting on the capital stocks capitalization data provided by Jord` a et al. (2019) Macrohistory lab dataset,<br> we infer that the relation between wealth and returns on wealth in Italy is monotone increasing and<br> convex in most years, namely, those that were not characterized by the significantly negative financial<br> turbulences the country has gone through. If one excludes these periods of extremely severe downturns<br> in financial markets, the top groups in the Italian wealth distribution prove to earn excess returns on<br> f<br> inancial assets that that range from 40% to 60% greater on average than those earned by the bottom<br> 90% of the wealth distribution. This effect is to be imputed to two main facts. First, interest rates on<br> net wealth are predominantly negative within the bottom two deciles in the Italian economy, due to debt<br> exposure within poorest groups naturally creating divergence between the top and the bottom half of<br> the distribution. Second, financial portfolios at the bottom ensure lower yields on financial wealth, thus<br> signaling worse investment opportunities. Returns at the top of the distribution are consistently more<br> volatile, though their expected performance over the 12 years considered is always higher in periods<br> of ordinary financial markets circumstances. An important role in the Italian economy is played by<br> returns on housing wealth: the reliance of great chunks of the middle of the wealth distribution on real<br> activities, making up around 60% of wealth of mid groups, makes their returns on wealth more stable<br> and considerably less affected by financial crises. Nonetheless, this is part of the reason as to why the<br> underdeveloment of Italian financial markets generate a structural increasing relation between wealth<br> and returns at the macroeconomic level, as riskier financial assets do secure higher returns on average,<br> which benefit the rich for the most part.<br> Thanks to the wide coverage of Macrohistory data, this methodology is replicable for other countries to<br> gather insights over household sector capital income distribution.<br>

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