Accounting for Wealth Concentration

Wealth – a household’s net worth – affects everyone’s lives. Wealth is distributed very unequally: about a fifth of households have negative or zero net worth, while some households own millions or even billions. Moreover, households own very different kinds of wealth; some only have a bank account and a house, others have stocks and are firm-owners. Why is the wealth distribution so skewed and how has this changed over time? Are there major differences between countries and how can we explain those? How do we even measure wealth? This dissertation seeks to shed light on all these questions, in four chapters. The first chapter reconstructs household wealth in the Netherlands since 1854 as well as its distribution. Wealth concentration was high in the late 19th century, declined after World War II, and has increased again. The Dutch colonial past contributed significantly to the high levels of concentration pre-World War II, while homeownership and the pension system are the major drivers of the current increase in household wealth. Chapters 2 and 3 show that the main theoretical way to think about wealth – the Pareto distribution – is rejected by the data. A simple alternative, the Weibull distribution, fits much better, and also explains cross-country differences in the number of billionaires. Chapter 4 tackles the measurement of the value of private businesses, the main wealth component of the wealthiest households. Correctly measuring these values results in large increases in wealth inequality and total household wealth