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Mapping and measuring the distribution of household wealth: A cross-country analysis

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  • Frank A Cowell
  • Eleni Karagiannaki
  • Abigail McKnight

Abstract

In this paper we compare the level, composition and distribution of household wealth in five industrial countries: the UK, US, Italy, Finland and Sweden. We exploit the harmonized data within the Luxembourg Wealth Study, which we have extended to allow us to examine trends in the UK and the US between the mid-1990s and the mid-2000s. Remaining differences between surveys, variable definitions and coverage are highlighted to the extent that they impact on cross-country comparisons. We find that the Nordic countries have lower average wealth holdings, smaller absolute gaps between low wealth and high wealth households but high relative measures of wealth inequality. Italian households hold very little debt and are much more likely to own their homes outright, leading to relatively high median levels of wealth. In contrast American households tend to hold much more housing debt well into retirement. Increases in owner occupation and house prices 2000-05 in the UK has led to substantial increases in wealth, particularly median wealth holdings and this had led to falls in relative measures of wealth inequality such as the Gini coefficient even though absolute gaps between high and low wealth households have grown substantially. We show that there are underlying country differences in terms of distributions of age, household composition, educational attainment and income as well as wealth and debt portfolios. Educational loans are increasing in their size and prevalence in some countries and look set to create some marked differences in the distribution of wealth for different age cohorts.

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File URL: http://sticerd.lse.ac.uk/dps/case/cp/CASEpaper165.pdf
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Bibliographic Info

Paper provided by Centre for Analysis of Social Exclusion, LSE in its series CASE Papers with number /165.

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Date of creation: Nov 2012
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Handle: RePEc:cep:sticas:/165

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Web page: http://sticerd.lse.ac.uk/case/_new/publications/default.asp

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Keywords: household wealth; wealth inequality; debt; housing assets; educational loans; age-wealth profiles;

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  1. repec:cep:sticas:case160 is not listed on IDEAS
  2. James Banks & Richard Blundell & James P. Smith, 2000. "Wealth inequality in the United States and Great Britain," IFS Working Papers W00/20, Institute for Fiscal Studies.
  3. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, octubre-d.
  4. Jenkins, Stephen P, 1990. " The Distribution of Wealth: Measurement and Models," Journal of Economic Surveys, Wiley Blackwell, vol. 4(4), pages 329-60.
  5. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
  6. Atkinson, A.B., 2006. "Concentration among the Rich," Working Paper Series RP2006/151, World Institute for Development Economic Research (UNU-WIDER).
  7. Joseph G. Altonji & Ulrich Doraszelski, 2005. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
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