Study Links Rising Income Volatility Among Top Earners to U.S. Wealth Inequality

High-income households in the United States face significantly greater earnings volatility today than in prior decades, encouraging greater precautionary saving among high earners and widening wealth inequality, according to new research from the National Bureau of Economic Research.

The working paper, “Rising Income Risk at the Top,” co-authored by Assistant Professor of Economics Michael Nattinger and other economists from government and academia, analyzes decades of U.S. administrative tax data. The findings reveal that permanent income risk shifted disproportionately toward the highest earners between the 1970s and the 2010s. During this period, top earners experienced an increase in career-level income instability, while lower- and middle-income households experienced smaller increases in permanent income risk.

To offset this heightened uncertainty, affluent households accumulated precautionary savings at an accelerated rate. The authors developed a structural macroeconomic model demonstrating that this heightened savings response among high earners increased the top 1 percent's share of national wealth while simultaneously putting downward pressure on the equilibrium risk-free interest rate.

"High-income workers respond to greater long-term income volatility by building larger financial buffers," Nattinger said. "This increased demand for safe assets among top earners explains a substantial portion of the growth in wealth concentration over the past several decades."

The research details how top earners maintain high savings rates in response to elevated permanent income risk. This targeted wealth accumulation accounts for roughly 40 percent of the observed rise in the top 1 percent wealth share since the 1970s. "Increased demand for safe assets drove down real interest rates, creating economic ripple effects that altered broader household saving behavior.

"When earnings risk concentrates at the top of the income distribution, macroeconomic outcomes change fundamentally," Nattinger said. "The shifts in individual earnings dynamics directly shape national trends in asset prices and wealth distribution."

The study concludes that understanding income risk across specific income brackets provides essential context for evaluating long-term macroeconomic trends, capital accumulation, and interest rates.

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J. Carter Braxton, Kyle F. Herkenhoff, Chengdai Huang, Michael Nattinger, Jonathan L. Rothbaum, and Lawrence D.W. Schmidt, "Rising Income Risk at the Top," NBER Working Paper 35664 (2026), https://doi.org/10.3386/w35664.