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Staff Reports

The Life-Cycle Dynamics of Wealth Mobility

Number 1097
April 2024

JEL classification: D14, E21, D15

Authors: Richard Audoly, Rory McGee, Sergio Ocampo, and Gonzalo Paz-Pardo

We use twenty-five years of tax records for the Norwegian population to study the mobility of wealth over people’s lifetimes. We find considerable wealth mobility over the life cycle. To understand the underlying mobility patterns, we group individuals with similar wealth rank histories using agglomerative hierarchical clustering, a tool from statistical learning. The mobility patterns we elicit provide evidence of segmented mobility. Over 60 percent of the population remains at the top or bottom of the wealth distribution throughout their lives. Mobility is driven by the remaining 40 percent, who move only within the middle of the distribution. Movements are tied to differential income trajectories and business activities across groups. We show parental wealth is the key predictor of who is persistently rich or poor, while human capital is the main predictor of those who rise and fall through the middle of the distribution.

Full Article

Author Disclosure Statement(s)

Richard Audoly
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Rory McGee
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Sergio Ocampo
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Gonzalo Paz-Pardo
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.

Suggested Citation:
Audoly, Richard, Rory McGee, Serbio Ocampo, and Gonzalo Paz-Pardo. 2024. “The Life-Cycle Dynamics of Wealth Mobility.” Federal Reserve Bank of New York Staff Reports, no. 1097, April. https://doi.org/10.59576/sr.1097

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