The wealth-to-salary ratio: a simple indicator of inequality

Abstract

In previous studies, using agent-based simulations of a model of a capitalist economy proposed by Ian Wright, we showed that inequality in both wealth and income distributions is largely governed by a single key parameter: the ratio between average wealth per capita and the mean salary, denoted by $R$. This parameter captures the relative importance of accumulated assets compared with labor income. In the model, larger values of $R$ are systematically associated with higher levels of inequality, as measured by the Gini coefficient. In the present work, we investigate whether this relationship is also observed in real-world economies. Using empirical data from the World Inequality Database (WID) and the Organization for Economic Co-operation and Development (OECD), we construct empirical estimates of $R$ and compare them with standard measures of income and wealth inequality. We find a positive relation between $R$ and inequality across several empirical settings, with the strongest relationships observed for mature and advanced economies. These results provide empirical support for the role of the wealth-to-salary ratio as a simple macroscopic indicator associated with economic inequality, while also highlighting the limitations imposed by differences in data definitions and measurement across countries and periods.