But the distribution of income and wealth may have important implications for macroeconomic developments, such as the evolution of consumption, which is the single biggest engine of growth in our economy. That is why the Federal Reserve has a significant interest in understanding distributional developments and their implications.
Recent research finds that households with lower levels of wealth spend a larger fraction of any income gains than households with higher levels of wealth. 46 Consequently, an economy that delivers an increasing share of income gains to highwealth households could result in less growth in consumer demand than one in which the gains are distributed more equally.