This paper investigates the channels through which saving flows impact the dynamics of wealth inequality. The analysis relies on an administrative panel that reports the assets and income of every Swedish resident at the yearly frequency. We document that the saving rate, defined as saving from labor income divided by net worth, is on average a decreasing function of net worth itself. The saving rate is also highly heterogeneous within net worth brackets. Heterogeneity across and within net worth brackets have conflicting effects on wealth inequality. As a result, saving rate heterogeneity is measured to have a strong impact on social mobility but only a weak impact on the distribution of net worth. Heterogeneity in wealth return is instead the main driver of the recent increase in top wealth shares.

Does marital status affect households' investment choices? Is accounting for distinct family types necessary for the correct evaluation of policies that aim at stimulating housing demand? To answer these questions, I develop a life-cycle model of housing and financial portfolio choice with dynamic and heterogeneous family types. I find that divorce risk encourages precautionary savings of couples in the form of liquid assets and reduces their demand for illiquid housing. Expected marriage, low income levels and larger exposure to income fluctuations prevent singles from becoming homeowners. Abstracting from distinct family types amplifies the attractiveness of housing and, as a result, overstates the effectiveness of housing policies such as lowering property taxes and reducing transaction costs by a factor greater than two. This mis-specification is largest for young households who are most likely to be single and whose marital transition risk is highest. In contrast, regulations that facilitate stock market participation help to foster wealth accumulation, because they encourage investment in high return assets that are cheaper to liquidate in the event of a (marital or labor income) shock.

We highlight the contribution of financial constraints to persistent disparities in wealth and access to geographic opportunities across demographic groups. We document a racial leverage gap—Black borrowers have substantially higher LTV ratios at mortgage origination, reflecting differences in pre-existing wealth and family transfers. We use a spatial life-cycle model to analyze the impacts of initial conditions on home purchase decisions, location choices, and long-term wealth accumulation for minority borrowers. Leverage constraints channel Black borrowers into less valuable housing choices and less lucrative labor markets. Targeted mortgage policies and reductions in moving frictions help close income and wealth gaps across groups.

Falling interest rates increase wealth inequality by raising the market value of long-duration assets held by wealthy households. To understand this phenomenon, we present a life-cycle model in which households can invest in short- or long-term assets to hedge against interest-rate risk. Our model matches important stylized facts. First, the share of long-term assets in households’ wealth is hump-shaped over the life-cycle. Within cohorts, it increases with wealth and earnings. Second, wealth inequality grows when interest rates fall, but only when wealth does not include the value of Social Security. Hedging demand against interest-rate risk can explain 40% of long-run changes in wealth inequality since 1960.