The Wealth Dynamics of American Families, 1984-94

Erik Hurst,

Erik Hurst Frank P. and Marianne R. Diassi Distinguished Service Professor of Economics - Booth School of Business, University of Chicago, Deputy Director - Becker Friedman Institute

Frank P. Stafford, and

FPS

Frank P. Stafford University of Michigan

Ming Ching Luoh

MCL

Ming Ching Luoh University of Michigan

Discussants: William G. Gale

William G. Gale Senior Fellow - Economic Studies, The Arjay and Frances Fearing Miller Chair in Federal Economic Policy, Co-Director - Urban-Brookings Tax Policy Center

DURING THE 1990s, the United States has experienced substantial economic growth in both family income and wealth. The rise in wealth has occurred despite the well-documented decline in traditional saving and investment since the mid- 1980s. However, because of the lack of panel data on the composition of individual wealth holdings, it has not so far been possible to analyze properly the changing patterns in household wealth accumulation or the distribution of these changes across the population. This paper introduces features of the comprehensive measures of wealth, saving, and income in the Michigan Panel Study of Income Dynamics (PSID), in particular, the supplements on household family wealth funded by the National Institute on Aging. These data currently available for 1984, 1989, and 1994-permit an improved understanding of a number of issues, such as generational differences in long-term saving and wealth accumulation, differences in the accumulation of wealth between African American and other households, regional differences in accumulation, and the importance for wealth accumulation of the stock market and other vehicles for the investment of savings.