Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
The Saving Glut of the Rich
Atif MianPrinceton
Ludwig StraubHarvard
Amir SufiChicago Booth
June 2020
1
Motivation
1
1.5
2
2.5
3D
ebt t
o G
DP
rat
io
1960 1970 1980 1990 2000 2010 2020
Rising debt ...
−1
0
1
2
3
4
5
6
Rea
l int
eres
t rat
e (%
)
1980 1990 2000 2010 2020
... and falling rates
2
Two Research Studies
1. The Saving Glut of the Rich (facts)
• Measuring the rise in savings by the rich in a national accounting framework• Savings have been transformed into gov and hh borrowing, as opposed to investment
2. Indebted Demand (model)
• Model incorporating differential MPCs out of lifetime income (non-homotheticity)• Inequality, financial liberalization lead to rising debt and lower interest rates• Implications for monetary and fiscal policy, risk of debt traps
3
Saving Glut of the Rich: Findings
• Measuring the savings of the rich, and what it finances:
• using income flows (the NIPA)• using measures of debt and wealth (the Financial Accounts)• using state-level first-difference specification that approximates ideal experiment
• Findings
• Savings by the top 1% have risen 2.5 to 4 pp of national income comparing 1960sand 1970s to post-2000; same order of magnitude as global saving glut
• Savings associated with borrowing by non-rich and gov; not rise in investment• State-level analysis: Rise in top income shares explains all of the rise in household
debt held as a financial asset by household sector
4
Related Empirical Literature
• Income inequality: Katz and Murphy (1992); Piketty and Saez (2003); Autor, etal (2008); Atkinson et al (2011); Piketty, et al (2017); CBO (2019); Smith, et al(2019)
• Wealth inequality: Saez and Zucman (2016); Wolf (2017); Bricker, et al (2018);Batty, et al (2019); Kuhn et al (2020); Smith, et al (2020)
• Long-term rise in household debt: Bartscher et al (2020)
• Linking inequality and borrowing: Rajan (2011); Cynamon and Fazzari (2015);Bertrand and Morse (2016); Kumhof, et al (2015)
• Consumption: Slesnick (2001), Krueger and Perri (2006), Blundell et al. (2008),Heathcote et al. (2010), Aguiar and Bils (2015), Attanasio and Pistaferri (2016),Meyer and Sullivan (2017), Guvenen et al. (2017), Fisher et al. (2016), Guvenenet al. (2019), and De Nardi et al. (2018)).
5
Measuring the Saving Glut of the Rich
6
Savings in the NIPA
• Start with GDP
Y = C + G + I + (X −M) (1)
• National income: Z = Y − δ + W − ε; δ: consumption of fixed capital, W : netincome from abroad, ε: statistical discrepancy; F = (X −M + W )
Z − C = G + I n + F − ε (2)
• Using the government budget constraint Sg = T − R − G :
Θ = Z − T + R − C = I n + F − Sg − ε (3)
• Θ is the key concept of aggregate private savings (includes personal andbusiness savings)
7
Accounting for the Distribution
• Split savings by income or wealth distribution:
Θtop1 + Θnext9 + Θbot90 = I n + F − Sg − ε
• Central challenge is measurement of Θit : savings by group i in year t
• Two approaches:
• Income less consumption approach:
Θit = Zit − Tit + Rit − Cit
• Wealth-based approach
Θit =∑j∈J
(∆W j
it − πjtW
ji,t−1
)
8
Measurement: Income less consumption approach
• Zit − Tit + Rit :
• Piketty et al 2018; Congressional Budget Office
• Cit :
• Two inputs: (1) consumption share in a baseline year and (2) assumption onlong-run evolution of consumption to income ratio
• Baseline uses PSID, SCF (Fisher et al 2017)
• Consumption to income ratio assumption over time follows Straub (2019):
Cit
yt= K ∗
(yityt
)β
9
Consumption Share of the Top 1% of Income Distribution
.02
.03
.04
.05
.06
.07
Con
sum
ptio
n sh
are
1960 1980 2000 2020
β = 1, under−report β = 1β = 0.7, under−report β = 0.7β = 0.5, under−report β = 0.5
10
Measurement: Wealth-based approach
• W jit :
• Saez Zucman 2016; Piketty et al 2018; Distributional Financial Accounts• Careful consideration of criticisms in Bricker et al 2018; Smith et al 2020
• πjt :
• As in Saez Zucman 2016 (and others), with a few changes• Ensure that total savings adds up to national accounts• Take into account debt write-downs
11
How Large Is the Saving Glut of Rich?
12
Saving Glut of the Rich Relative to 1982(Income less consumption approach)
−.02
0
.02
.04
.06
Sca
led
by n
atio
nal i
ncom
e
1960 1980 2000 2020
β = 1, under−report β = 1β = 0.7, under−report β = 0.7β = 0.5, under−report β = 0.5
13
Saving Glut of the Rich over Time
Time Period Baseline
63-82 0.05783-97 0.07398-07 0.08608-15 0.099
14
Saving Glut of the Rich over Time: Robustness
PSZ CBODecade β = 1 β = 0.7 β = 0.5 β = 1 β = 0.7 β = 0.5
79-82 0.000 0.000 0.000 0.000 0.000 0.00083-97 0.015 0.016 0.018 0.017 0.018 0.02098-07 0.028 0.032 0.035 0.037 0.040 0.04308-15 0.041 0.046 0.049 0.031 0.035 0.039
15
Saving Glut of the Rich(Wealth-based approach)
−.02
0
.02
.04
Sca
led
by n
atio
nal i
ncom
e(r
elat
ive
to 7
7−82
)
63−67 68−72 73−77 78−82 83−87 88−92 93−97 98−02 03−07 08−15
16
Where Does the Saving Glut Settle?
17
Where Does the Saving Glut Settle?
• Re-arranging the NIPA equation and scaling by Zt yields:
θtop1,t =I nt + Ft
Zt− θnext9,t − θbot90,t −
Sgt
Zt
• Saving glut could be invested, could be sent overseas ...
• or could finance more borrowing by the bottom 99% and the government
18
Net Domestic Investment and the Foreign Account
0
.05
.1
.15S
cale
d by
nat
iona
l inc
ome
1960 1980 2000 2020
Net domestic investmentSaving of top 1%
Investment
−.05
0
.05
.1
Sca
led
by n
atio
nal i
ncom
e
1960 1980 2000 2020
Current account positionSaving of top 1%
Current account
19
Saving Glut of the Rich and the Global Saving Glut
−.02
0
.02
.04
.06
Sca
led
by n
atio
nal i
ncom
e
1960 1980 2000 2020
Foreign flows into U.S.Saving of top 1%
20
Traditional Channels of Absorption
Time Period Saving glut Investment Current Account
63-82 0.057 0.114 0.00383-97 0.073 0.088 -0.02098-07 0.086 0.091 -0.05008-15 0.099 0.045 -0.033
21
Saving Glut of the Rich and Saving of the non-Rich
−.1
−.05
0
.05
.1
Sca
led
by n
atio
nal i
ncom
e
1960 1980 2000 2020
top 1%next 9%bottom 90%
22
Using the Wealth-based Approach
−.1
−.05
0
.05
Sca
led
by n
atio
nal i
ncom
e(r
elat
ive
to 7
7−82
)
63−67 68−72 73−77 78−82 83−87 88−92 93−97 98−02 03−07 08−15
top 1%next 9%bottom 90%
23
Absorption by the Bottom 90%
Time Period Top 1% Next 9% Bottom 90% Gov Saving
63-82 0.057 0.043 0.040 -0.03083-97 0.073 0.043 -0.011 -0.05198-07 0.086 0.042 -0.055 -0.02608-15 0.099 0.044 -0.038 -0.089
24
Integrating to Obtain Accumulated Absorption• Start with:
θtop1,t + θbot99,t −(I n
Z
)t
−(F
Z
)t
+
(Sg
Z
)t
+ εt = 0
• For each of the 6 variables, construct
Vt = Vt − Vpre
• Obtain:
V =2015∑
t=1983
Vt
• Then:
θtop1 + θbot99 −(I n
Z
)−(F
Z
)+
(Sg
Z
)+ ε = 0
25
Absorption of the Accumulated Saving Glut of Rich
Top1%
Saving Glut
Next 9% Saving
F
I
Bottom 90% Saving
Government Saving
ε
−2
−1
0
1
26
Linking the Saving of the Rich to the Borrowing of the Non-Rich
27
The Rich Financing the Non-Rich
• Goal is to measure how much of the wealth of the rich represents a claim on theborrowing of the non-rich
• Matrix representation:A1
A2...AI
=
ω1,1 ω1,2 · · · · · · ω1,C
ω2,1 ω2,2 · · · · · · ω2,C...
.... . .
. . ....
ωI ,1 ωI ,2 · · · · · · ωI ,C
F1F2...FC
• The vector Fc requires us to “unveil” the financial system; the rich hold household
debt through banks, non-financial businesses, mutual funds, etc.
28
Unveiling the Financial System
• Start with household debt (mortgages and consumer credit) in Financial Accounts
• Use linkages in Financial Accounts to unveil the holdings in a series of rounds
• Series of rounds
1. Start with GSEs, ABS issuers, banks, REITS, finance companies2. Unveil GSEs, ABS issuers, REITS, finance companies3. Unveil mutual and money market funds4. Unveil banks5. Unveil corporations
• Proportionality of ownership claims is crucial assumption
29
START
Total HH Debt
Pass-Through
Agency,ABS, REITs,
Finance Comps
FEDMutual/Money
Market Funds
DepositoryInstitutions
Non-Fin. CorpBusinesses
Non-Fin.Non-CorpBusinesses
FINAL
HH DebtHeld by U.S.Households
Pensions
0.18
Life Ins.Reserves
0.04
Mutual Funds
0.05
MoneyMarket
0.03
Bonds
0.05
Equity
0.08
CheckableDeposits
0.01
Time De-posits
0.25
Total HHDebt
1.00
Pass-Through
0.62
DepositoryInstitutions
0.46
FED
0.00
MMF/MUFU
0.09
NF Corp
0.08
NF NCBusinesses
0.03
30
START
Total HH Debt
Pass-Through
Agency,ABS, REITs,
Finance Comps
FEDMutual/Money
Market Funds
DepositoryInstitutions
Non-Fin. CorpBusinesses
Non-Fin.Non-CorpBusinesses
FINAL
HH DebtHeld by U.S.Households
Pensions
0.18
Life Ins.Reserves
0.04
Mutual Funds
0.05
MoneyMarket
0.03
Bonds
0.05
Equity
0.08
CheckableDeposits
0.01
Time De-posits
0.25
Total HHDebt
1.00
Pass-Through
0.62
DepositoryInstitutions
0.46
FED
0.00
MMF/MUFU
0.09
NF Corp
0.08
NF NCBusinesses
0.03
30
START
Total HH Debt
Pass-Through
Agency,ABS, REITs,
Finance Comps
FEDMutual/Money
Market Funds
DepositoryInstitutions
Non-Fin. CorpBusinesses
Non-Fin.Non-CorpBusinesses
FINAL
HH DebtHeld by U.S.Households
Pensions
0.18
Life Ins.Reserves
0.04
Mutual Funds
0.05
MoneyMarket
0.03
Bonds
0.05
Equity
0.08
CheckableDeposits
0.01
Time De-posits
0.25
Total HHDebt
1.00
Pass-Through
0.62
DepositoryInstitutions
0.46
FED
0.00
MMF/MUFU
0.09
NF Corp
0.08
NF NCBusinesses
0.03
30
START
Total HH Debt
Pass-Through
Agency,ABS, REITs,
Finance Comps
FEDMutual/Money
Market Funds
DepositoryInstitutions
Non-Fin. CorpBusinesses
Non-Fin.Non-CorpBusinesses
FINAL
HH DebtHeld by U.S.Households
Pensions
0.18
Life Ins.Reserves
0.04
Mutual Funds
0.05
MoneyMarket
0.03
Bonds
0.05
Equity
0.08
CheckableDeposits
0.01
Time De-posits
0.25
Total HHDebt
1.00
Pass-Through
0.62
DepositoryInstitutions
0.46
FED
0.00
MMF/MUFU
0.09
NF Corp
0.08
NF NCBusinesses
0.03
30
START
Total HH Debt
Pass-Through
Agency,ABS, REITs,
Finance Comps
FEDMutual/Money
Market Funds
DepositoryInstitutions
Non-Fin. CorpBusinesses
Non-Fin.Non-CorpBusinesses
FINAL
HH DebtHeld by U.S.Households
Pensions
0.18
Life Ins.Reserves
0.04
Mutual Funds
0.05
MoneyMarket
0.03
Bonds
0.05
Equity
0.08
CheckableDeposits
0.01
Time De-posits
0.25
Total HHDebt
1.00
Pass-Through
0.62
DepositoryInstitutions
0.46
FED
0.00
MMF/MUFU
0.09
NF Corp
0.08
NF NCBusinesses
0.03
30
START
Total HH Debt
Pass-Through
Agency,ABS, REITs,
Finance Comps
FEDMutual/Money
Market Funds
DepositoryInstitutions
Non-Fin. CorpBusinesses
Non-Fin.Non-CorpBusinesses
FINAL
HH DebtHeld by U.S.Households
Pensions
0.18
Life Ins.Reserves
0.04
Mutual Funds
0.05
MoneyMarket
0.03
Bonds
0.05
Equity
0.08
CheckableDeposits
0.01
Time De-posits
0.25
Total HHDebt
1.00
Pass-Through
0.62
DepositoryInstitutions
0.46
FED
0.00
MMF/MUFU
0.09
NF Corp
0.08
NF NCBusinesses
0.03
30
START
Total HH Debt
Pass-Through
Agency,ABS, REITs,
Finance Comps
FEDMutual/Money
Market Funds
DepositoryInstitutions
Non-Fin. CorpBusinesses
Non-Fin.Non-CorpBusinesses
FINAL
HH DebtHeld by U.S.Households
Pensions
0.18
Life Ins.Reserves
0.04
Mutual Funds
0.05
MoneyMarket
0.03
Bonds
0.05
Equity
0.08
CheckableDeposits
0.01
Time De-posits
0.25
Total HHDebt
1.00
Pass-Through
0.62
DepositoryInstitutions
0.46
FED
0.00
MMF/MUFU
0.09
NF Corp
0.08
NF NCBusinesses
0.03
30
START
Total HH Debt
Pass-Through
Agency,ABS, REITs,
Finance Comps
FEDMutual/Money
Market Funds
DepositoryInstitutions
Non-Fin. CorpBusinesses
Non-Fin.Non-CorpBusinesses
FINAL
HH DebtHeld by U.S.Households
Pensions
0.18
Life Ins.Reserves
0.04
Mutual Funds
0.05
MoneyMarket
0.03
Bonds
0.05
Equity
0.08
CheckableDeposits
0.01
Time De-posits
0.25
Total HHDebt
1.00
Pass-Through
0.62
DepositoryInstitutions
0.46
FED
0.00
MMF/MUFU
0.09
NF Corp
0.08
NF NCBusinesses
0.03
30
Who Holds Household Debt as a Financial Asset?
0
.2
.4
.6
.8S
cale
d by
nat
iona
l inc
ome
1960 1980 2000 2020
Who holds HH debt?
0
.1
.2
.3
Sca
led
by n
atio
nal i
ncom
e
1960 1980 2000 2020
Relative to 1982
U.S. Households Rest of worldGovernment Residual
31
The Rich Financing the Non-Rich
• Matrix representation:A1
A2...AI
=
ω1,1 ω1,2 · · · · · · ω1,C
ω2,1 ω2,2 · · · · · · ω2,C...
.... . .
. . ....
ωI ,1 ωI ,2 · · · · · · ωI ,C
F1F2...FC
• The weights ωi ,c come from capitalization technique (SZ 2016, Smith et al 2020)
or Distributional Financial Accounts (Batty et al 2019)
32
Who Holds Household Debt across the Income Distribution?
0
.2
.4
.6S
cale
d by
nat
iona
l inc
ome
1960 1980 2000 2020
Who holds HH debt?
−.1
0
.1
.2
.3
Sca
led
by n
atio
nal i
ncom
e
1960 1980 2000 2020
Relative to 1982
Top 10% Bottom 90%Rest of world GovernmentResidual
33
Net Household Debt across Wealth Distribution Relative to 1982
−.2
0
.2
.4
Sca
led
by N
I, re
lativ
e to
198
2
1960 1980 2000 2020
Top 1% Next 9% Bottom 90%
34
State-level analysis
35
Advantages of State-level Analysis
• Ideal thought experiment: holding all else equal, how does an increase in topincome shares affect the accumulation of household debt held as a financial assetof the rich?
• State-level first-difference specification is closer to this ideal thought experiment
• Advantages:
• Removes other aggregate secular trends (demographics, current account deficits, etc)• Helps more directly tie rise in top income shares to accumulation of household debt
as financial asset
36
Change in Top 1% Share of Income Across States
WV IA M
S ND LA A
KK
Y AR OH
IN MI
ME W
IN
CR
IK
SM
O NM HI NE
VA OK
MD
PA
VT MT
OR
NH MN
GA
AL DE
TN SC SD N
J ID UT CO DC
TX IL W
A AZ M
A CA
FL CT
NY
WY
NV
0
.05
.1
.15
.2
.25
Cha
nge
in to
p 1%
sha
re, 1
982
to 2
007
37
State-level data
• Benchmark: same as Saez-Zucman, with state-level identifiers to create bothwealth and income shares across the income distribution
• Key difference: state-level identifiers missing in micro-data for those with AGIabove $200K
• Ameliorate this problem using state-level aggregates for all individuals with morethan $200K from SOI (new dataset!), but then top income group cannot be toonarrow (top 6%)
• Novel data allows us to create:
AHHDi ,s,t =
∑c
πc,i ,s,t ∗ AHHDc,t
38
Percentage of Filers with AGI Above $200,000
0
2
4
6
Per
cent
of f
ilers
with
AG
I abo
ve $
200,
000
1980 1990 2000 2010
39
State-level specification
• Let
∆82,07Yis =AHHDis,2004−07
AGIs,2004−07−
AHHDis,1982
AGIs,1982
• Key specification:
∆82,07Yis = α + βi ∗ ∆82,07Top6Shares + Γ ∗ Xs + εs
• Notice:
• ∆82,07Ys =∑
i ∆82,07Yis , and so sum of βi gives total effect of ∆82,07Top6Shares• Controls Xs allow us to fix initial household debt ownership (valuation effects),
average income growth, initial income levels, etc
40
Change in Household Debt Holding Against Rise in Top Income Share
AL
AKAZ
AR
CACO
CT
DE
DCFL
GA
HI
ID
IL
IN
IA KS
KY
LA
ME
MD
MA
MIMN
MS
MO
MTNE
NV
NH
NJNM
NY
NC
ND
OH
OKOR
PA
RISCSD
TN
TX
UT
VT
VA
WA
WV
WI
WY
0
.1
.2
.3
.4
∆ 82
−07
Y T
op 6
,s,1
982
.05 .1 .15 .2 .25∆ Top 6% share
Top 6%
AL
AK
AZ
AR
CACO
CT
DE
DC
FL
GA
HI
ID
IL
IN
IA
KSKY
LA
ME
MD
MA
MI
MN
MS
MO
MT
NE
NV
NH
NJ
NM
NY
NCND
OHOK
OR
PA
RI
SC
SD
TN
TX
UT
VT
VA
WA
WV
WIWY
−.05
0
.05
.1
.15
∆ 82
−07
Y B
ot 9
4,s,
1982
.05 .1 .15 .2 .25∆ Top 6% share
Bottom 94%
41
Back of Envelope Aggregate Calculation
• Rise in the share of the top 6% is 14.9% in aggregate
• Coefficient implies: 14.9% increase in top income share associated with a 29.1percentage point increase in the holdings of household debt as a share of income
• Total rise in household debt held as a financial asset by households as a share ofnational income at the U.S. level between 1982 and 2007 is 30.3 percentagepoints
• State-level coefficient estimate implies that rise in top 6% income share explainsalmost all of the rise in household debt held as finacnial asset by households
42
Post Recession: The Rise in Government Debt
43
The Rise of Government after Great Recession
0
.05
.1
.15
.2
.25
Sca
led
by n
atio
nal i
ncom
e(r
elat
ive
to 2
007)
2006 2008 2010 2012 2014 2016
Top 10% Bottom 90%Rest of world GovernmentResidual
44
Conclusion
45
Implications
• Saving glut of the rich may be linked to decline in interest rates and rise inhousehold debt across advanced countries (see model paper)
• Because they ignore distribution, national saving rates can be misleading
• Financial system is channeling funds to households and governments, whileinvestment is weak. Why?
46
Top income shares and rising household debt across countries
8
10
12
14
16
Top
1%
inco
me
shar
e (%
)
50
100
150
200
Hou
seho
ld &
gov
ernm
ent d
ebt t
o G
DP
(%
)
1960 1970 1980 1990 2000 2010 2020
Household & government debt to GDP (%)Top 1% income share (%)
47
Extra Slides
48
Instruments through which Household Debt Held by Households
−.1
−.05
0
.05
.1S
cale
d by
NI,
rela
tive
to 1
980
1980 1990 2000 2010 2020
Pensions EquityAnnuities Mutual funds
More equity−like
−.1
−.05
0
.05
.1
Sca
led
by N
I, re
lativ
e to
198
0
1980 1990 2000 2010 2020
Checking deposits Time depositsLife Ins Reserves BondsMoney market funds
More fixed income−like
49
Through What Instruments Does Top 10% Hold Household Debt?
0
.05
.1
.15
.2S
cale
d by
nat
iona
l inc
ome
Time deposits Bonds Pensions Equity Mutual funds
Top 10%, 2007 level
0
.02
.04
.06
Sca
led
by n
atio
nal i
ncom
e
Time deposits Equity Bonds Mutual fundsPensions
Top 10%, 1992−2007 change
50
Non-financial business deposits and money market fund holdings
.08
.1
.12
.14
.16
.18
Sca
led
by n
atio
nal i
ncom
e
1960 1980 2000 2020
51
Who Holds Household Debt across the Wealth Distribution? Details
0
.05
.1
.15
Sca
led
by n
atio
nal i
ncom
e
1990 1995 2000 2005 2010 2015
Top 1%
−.05
0
.05
.1
Sca
led
by n
atio
nal i
ncom
e
1990 1995 2000 2005 2010 2015
Next 9%
DFA PSZ
52
Robustness of household debt holdings of the rich
−.1
0
.1
.2
.3
Sca
led
by n
atio
nal i
ncom
e(r
elat
ive
to 1
982)
1960 1980 2000 2020
Top 10% (baseline)Top 10% (UST10y)Top 10% (100 bp spread)Top 10% (50 bp spread)
53
Household debt holdings of the rich, DFA
0
.02
.04
.06
.08S
cale
d by
nat
iona
l inc
ome
(rel
ativ
e to
198
9)
1990 1995 2000 2005 2010 2015
Top 1% incomeTop 1% wealth
DFA: HHD
0
.05
.1
.15
.2
Sca
led
by n
atio
nal i
ncom
e(r
elat
ive
to 1
989)
1990 1995 2000 2005 2010 2015
Top 10% (PSZ)Top 10% (DFA)
DFA & PSZ: HHD
54
Change in Top 1% Share Against Change in Top 6% Share
AK
AL
AR
AZCA
CO
CT
DC
DE
FL
GAHI
IA
ID IL
IN
KSKY
LA
MA
MDME
MI
MN
MO
MS
MTNC
ND
NENH NJNM
NV
NY
OH
OK OR
PARI
SCSD
TN
TX
UT
VAVT
WA
WI
WV
WY
0
.05
.1
.15
.2
.25
Cha
nge
in to
p 1%
sha
re, 1
982
to 2
007
0 .05 .1 .15 .2 .25Change in top 6% share, 1982 to 2007
55
Note: Survey Data Misses Many Sources of Income
• The measure of saving used here includes both personal and business saving
• Survey data misses all of business saving, and many sources of personal saving
• Business saving (undistributed corporate profits) averaged 4.2% of nationalincome from 2012 to 2015, completely ignored in survey measures of income
• Survey data misses 21% of personal income (Heathcote, et al 2010) includingemployer-contributions to pensions and income on pensions that is not yetdistributed
56