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Is property driving income distribution? – An analysis of the linkage between income and wealth in Finland, France and Spain

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  • Kavonius, Ilja Kristian
  • Törmälehto, Veli-Matti

Abstract

In this article, the link between financial wealth and pre-tax household income distribution is scrutinised for three European countries using a conceptually fully consistent macro framework. First, national balance sheets are combined with the related income flows. After this, income flows that are not property income but that are considered part of national income (e.g., wages and salaries) are added, the national income flows are broken down by institutional sector, and the household sector income flows separated. Finally, distributional household microdata are used to break down the aggregate household sector income flows by income decile. The article utilises this framework to analyse the evolution of rates of return and capital and labour shares, as well as the way in which the property income flows created by financial wealth have affected household primary income distribution.

Suggested Citation

  • Kavonius, Ilja Kristian & Törmälehto, Veli-Matti, 2023. "Is property driving income distribution? – An analysis of the linkage between income and wealth in Finland, France and Spain," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 858-879.
    • Handle: RePEc:eee:jcecon:v:51:y:2023:i:3:p:858-879
    DOI: 10.1016/j.jce.2023.02.006
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    References listed on IDEAS

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    1. Maryse Fesseau & Florence Wolff & Maria Liviana Mattonetti, 2013. "A Cross-country Comparison of Household Income, Consumption and Wealth between Micro Sources and National Accounts Aggregates," OECD Statistics Working Papers 2013/3, OECD Publishing.
    2. Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2018. "Distributional National Accounts: Methods and Estimates for the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(2), pages 553-609.
    3. Nora Lustig, 2019. "The “Missing Rich” in Household Surveys: Causes and Correction Approaches," Commitment to Equity (CEQ) Working Paper Series 75, Tulane University, Department of Economics.
    4. Nora Lustig, 2020. "The ``missing rich'' in household surveys: causes and correction approaches," Working Papers 520, ECINEQ, Society for the Study of Economic Inequality.
    5. Petrova, Bilyana & Ranaldi, Marco, 2021. "Determinants of Income Composition Inequality," SocArXiv vyrz7, Center for Open Science.
    6. Peter H. Lindert, 2014. "Making the Most of Capital in the 21st Century," NBER Working Papers 20232, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Functional distribution; Income distribution; National income; Households; Wealth;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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