Job Market Paper

• Robust Estimation of Private Business Wealth

Abstract: Estimating the market value of private businesses is essential for understanding both aggregate firm dynamics and top wealth inequality, yet these values are inherently unobservable. This paper introduces an econometric approach that treats the gap between true market values and initial estimates as measurement error. I employ time-series restrictions on these errors as moment conditions within a GMM framework, and use the fitted values from these estimations as error-free estimates of private business wealth and capital stocks. Applying this method to Dutch administrative data linking the universe of firms to their owners, I find that aggregate private business wealth increases by 30% of GDP initially, and is more stable than the unadjusted series. Top 1% and 0.1% wealth shares increase by 3–5 percentage points, peaking at 38% and 20%, respectively. Adjusted returns to firm wealth exhibit a steeper gradient across the wealth distribution than unadjusted returns, consistent with models of return heterogeneity.