November 28, 2021


Only The Finest Women

Wealth and history: A reappraisal

A huge literature has studied the historical evolution of prosperity accumulation and wealth distribution in Western countries (e.g. Atkinson and Harrison 1978, Goldsmith 1985, Lindert 2000, Soltow and Van Zanden 2001, Roine and Waldenström 2015, Scheidel 2018). Specially noteworthy contributions are Piketty (2014) and Piketty and Zucman (2014), which document and interpret traits in mixture prosperity-earnings ratios and top rated prosperity shares since the industrialisation period. In accordance to their interpretation, prosperity accumulation and prosperity concentration achieved extraordinary amounts throughout the period of unfettered capitalism in the 19th century. In the 20th century, world wars and capital taxation equalised prosperity until finally the 1980s, when market place-pleasant reforms resurrected cash values and led to larger wealth inequality and funds shares.

Current scientific studies, however, have revised some of the historical sequence of Piketty and Zucman, including a lot more place observations. In a new paper (Waldenström 2021), I examine the reliability of these new data and analyse how they influence the historic prosperity developments and our knowledge of the motorists at the rear of them. 

Revised historical wealth-income ratios

Determine 1 displays combination personal prosperity-profits ratios in 6 international locations for which consistent, very long-operate proof is available: France, Germany, Spain, Sweden, the British isles, and the US. The series of Piketty and Zucman present wealth-profits ratios currently being historically significant in 19th century Europe, all over 600–800% of national income, and spectacular drops all through the world wars soon after which they stayed low till the 1980s when they improved substantially.

The revised and new nation series for Europe provides a diverse photo, particularly for the pre-WWI interval. The new German series has a prosperity-earnings ratio of 500% as an alternative of 600%, and the new British isles series displays 450% as an alternative of 700%. For recently added Spain and Sweden, pre-WWI wealth-income ratios are around 450–500% of national income (the series of France and the US have not been re-examined). The principal factors that the revised German and British isles sequence vary from these of Piketty and Zucman is the use of new sources and altered computational assumptions (see Waldenström 2021 for even further dialogue). Looking at the 20th century, the new sequence existing a fewer risky pattern, with some variation about the globe wars but devoid of any lasting pattern breaks (besides for Germany). The article-1990 raises are noticed in each more mature and more recent collection.

Figure 1 Prosperity-cash flow ratios in heritage

Be aware: See Waldenström (2021) for definitions and sources.

A individual locating of Piketty and Zucman is the extraordinary pre-WWI divide among Europe and the US, shown in the remaining panel of Figure 2. Their clarification is that wealth accumulated to substantial amounts in pre-democratic, very low-tax Europe whereas the US was a younger country with a lot less time to build up money and an abundance of land producing funds much less precious. Having said that, the new series for Europe in Determine 2’s appropriate panel displays no these continental divide. 

Figure 2 Europe-US wealth-cash flow ratios: A pre-WWI divide?

Be aware: Remaining panel: Piketty-Zucman “Europe” is made up of France, Germany, and the Uk. Suitable panel: Revised and prolonged “Europe” is composed of France, Germany, Spain, Sweden, and the British isles, with revised collection for Germany and the British isles. All European sequence are unweighted averages. See Waldenström (2021) for population-weighted European averages, and for definitions and sources.

The publish-war increase of preferred wealth

Considering the fact that 1950, personal wealth-money ratios have developed steadily around the Western globe, accelerating immediately after 1990. Figure 3 examines this advancement by decomposing private prosperity into three asset groups: housing wealth, pension prosperity, and other wealth. 

The key end result is that non-public wealth underwent a structural shift about the 20th century. All-around 1900, wealth was dominated by agricultural estates and corporate prosperity, assets predominantly held by the loaded. For the duration of the article-war period, wealth accumulation arrived predominantly in housing and funded pensions, which are property held by common people. This compositional development experienced crucial distributional implications.

Determine 3 Decomposing mixture wealth-income ratios since 1890

Note: ‘Housing wealth’ incorporates buildings and land below 1-2 spouse and children houses, apartment buildings (which includes financial shares in tenant-owned apartments, national accounts item AF.519). ‘Pension wealth’ features all insurance cost savings assets in AF.6. See Waldenström (2021) for even further info about definitions and resources.

Wealth concentration: Lengthy-term equalisation and then stabilisation

The distribution of wealth amongst households is a central dimension in the analysis of personal wealth in culture. Figure 4 demonstrates the evolution of top rated-percentile prosperity shares, which is the most commonly used distributional measure in the historic literature.

Prosperity focus was extremely large a century ago, with the richest percentile proudly owning in between 50% and 70% of all personal wealth. From the 1920s to the 1970s, prosperity concentration fell dramatically in the Western earth. Region scientific studies confirm the importance of homeownership and pension savings for this equalisation trend. In the 1970s, prosperity equalisation stopped, but then Europe and the US abide by individual paths. In Europe, major prosperity shares stabilise at traditionally minimal stages, potentially with a slight increasing tendency, whilst in the US, top rated wealth shares have increased (just by how a lot is at this time debated).

This stability of publish-1970 leading prosperity shares may well seem to be contradictory to the substantial raises in combination wealth-revenue ratios (Figure 1). Having said that, it is dependable with most combination wealth today being in housing and pensions, which are assets predominantly held by minimal- and middle-prosperity homes, implying a more equal distribution of wealth than a century in the past. 

Some scientific tests have examined no matter if adding social stability wealth – described as the net present worth of potential pension incomes in unfunded pension schemes – or offshore wealth would affect prolonged-run prosperity focus trends. In Waldenström (2021), I existing available historical proof on these added belongings and their distributional affect. The base line is that they do influence the leading prosperity shares in the modern era, but not enough to alter the primary result in Figure 4 that wealth nowadays is much a lot more equally dispersed than it was throughout the early section of the 20th century.

Determine 4 Leading 1% prosperity share in 6 international locations, 1896–2019

Observe: See Waldenström (2021) for definitions and sources.


The historic evaluation of capital’s job in Western market economies is being revised. New and revised sequence advise that aggregate prosperity-money ratios were being lower before WWI than formerly thought, and that private prosperity has modified from remaining generally held by the wealthy to getting largely held by the middle course. This would demonstrate why the dramatic historical wealth equalisation about the previous century has not been reversed in current a long time, regardless of fast raising combination wealth-cash flow ratios. 

The new final results influence our knowledge of the long-operate evolution of wealth. They issue the see that unfettered capitalism generates extreme ranges of money accumulation. They also solid doubt on the rationalization that wars, crises, and capital taxation are essential for wealth equalisation. As a substitute, the historical proof emphasises the wide accumulation of commonly dispersed domestic assets in housing and pension discounts when accounting for the observed traits in the expansion distribution of wealth more than the earlier century.

A promising next action would be to research the institutional alterations underlying the accumulation of well known prosperity. Amongst these variations are reforms selling democratic alter, broadened instructional attainment, and improved labour legal rights, which contributed to lifting the earnings of employees and providing them possibilities to invest in their very own long term.


Atkinson, A B and A Harrison (1978), The Distribution of Personalized Wealth in Britain, Cambridge University Press. 

Goldsmith, R W (1985), Comparative Nationwide Balance Sheets: A Review of 20 Nations, 1688–1978, University of Chicago Push. 

Piketty, T (2014), Money in the 20-1st Century, Belknap of Harvard University Push.

Piketty, T and G Zucman (2014), “Capital is Back again: Prosperity-Revenue Ratios in Wealthy Nations 1700–2010”, Quarterly Journal of Economics 129(3): 1255–1310. 

Piketty, T and G Zucman (2013), “Rising wealth-to-cash flow ratios, inequality, and growth”,, 26 September. 

Roine, J and D Waldenström (2015), “Long-Run Tendencies in the Distribution of Income and Wealth”, Handbook of Cash flow Distribution, Volume 2A, North-Holland. 

Scheidel, W (2018), The Wonderful Leveler: Violence and the Heritage of Inequality from the Stone Age to the Twenty-Initially Century, Princeton College Press. 

Scheidel, W (2019), “Inequality: Total war as a good leveller”,, 02 September.

Soltow, L and J L Van Zanden (2001), Revenue and Wealth Inequality in the Netherlands, 16th–20th Century, Het Spinhuis.

Waldenström, D (2021), “Wealth and Historical past: An Update”, CEPR Dialogue Paper 16631.