After remaining stable during most of the postwar period, top wealth shares recently have trended upward in the United States. The average net worth–wealth minus debt–of the top 1% wealth class grew by 78% from 1983 to 2004, while for the middle 20% net worth grew by 27%. Financial development is related to wealth accumulation at the top. Non-residential assets are relatively unimportant for the median wealth bracket (24% of net worth), but for the top 1% they constitute 91% of net worth. Hence the recent decline in housing prices is shrinking the wealth owned by the median household. The top 1% owns 42% of net financial assets; the bottom 90 % owns 19 %. The income derived from owning financial assets–especially equities– has risen in recent year. Corporate payouts are up, as are opportunities for capital gains. (A dollar invested in an S&P index fund in 1980 would be worth $1500 today.) In 2004, the top 10% accounted for 61% of all unrealized capital gains. To the extent that the wealthy get better (including inside) information and realize larger financial returns than the less wealthy, their share of finance-derived income will be greater than their share of financial wealth. …
U.S. institutional investors in 1960 owned 12% of U.S. equities; by1990 they owned 45% and the share rose to 61% in 2005. Institutions today own 68% of the 1000 largest U.S. public corporations. Although institutional holdings rose over a long period, it was in the 1980s that institutions first began to flex their muscles as shareholder activists. Because institutional investors rarely own more than 1% of a company, they can and do press companies to pursue riskier business strategies such as heavy debt, the payment of which requires stringent cost-cutting. Indeed, institutional activism is associated with asset divestitures and with layoffs. This does not mean that institutions push firms to the edge of bankruptcy, but even a bankruptcy now and then would not do major damage to their portfolios.