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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.

Suggested Citation

  • Frank A Cowell & Eleni Karagiannaki & Abigail McKnight, 2012. "Mapping and measuring the distribution of household wealth: A cross-country analysis," CASE Papers case165, Centre for Analysis of Social Exclusion, LSE.
  • Handle: RePEc:cep:sticas:case165
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    File URL: http://sticerd.lse.ac.uk/dps/case/cp/CASEpaper165.pdf
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    References listed on IDEAS

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    1. 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).
    2. John Hills & Ben Richards, 2012. "Localisation and the means test: A case study of support for English students from Autumn 2012," CASE Papers case160, Centre for Analysis of Social Exclusion, LSE.
    3. Atkinson, A.B., 2006. "Concentration among the Rich," WIDER Working Paper Series 151, World Institute for Development Economic Research (UNU-WIDER).
    4. Jenkins, Stephen P, 1990. " The Distribution of Wealth: Measurement and Models," Journal of Economic Surveys, Wiley Blackwell, vol. 4(4), pages 329-360.
    5. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, July.
    6. James Banks & Richard Blundell & James Smith, 2000. "Wealth inequality in the United States and Great Britain," IFS Working Papers W00/20, Institute for Fiscal Studies.
    7. 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.
    8. Eva Sierminska & Andrea Brandolini & Timothy M Smeeding, 2007. "Comparing wealth distribution across rich countries: the Luxembourg Wealth Study project," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Measuring the financial position of the household sector", Basel, 30-31 August 2006 - Volume 1, volume 25, pages 297-310 Bank for International Settlements.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Mapping and measuring the distribution of household wealth: A cross-country analysis
      by maximorossi in NEP-LTV blog on 2012-12-11 20:04:47

    Citations

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    Cited by:

    1. Michael, Bryane & Hartwell, Christopher A. & Ho, Gary, 2013. "Does Financial Market Development Explain (or at Least Predict) the Demand for Wealth Management and Private Banking Services in Developing Markets?," EconStor Preprints 109960, ZBW - German National Library of Economics.
    2. Bogliacino, Francesco & Rojas Lozano, Daniel, 2017. "The evolution of inequality in Latin America in the 21st century: Patterns, drivers and causal hypotheses," MPRA Paper 77803, University Library of Munich, Germany.
    3. Giorgio Motta & Patrizio Tirelli, 2013. "Limited Asset Market Participation, Income Inequality and Macroeconomic Volatility," Working Papers 261, University of Milano-Bicocca, Department of Economics, revised Dec 2013.
    4. Pirmin Fessler & Martin Schürz, 2013. "Cross-Country Comparability of the Eurosystem Household Finance and Consumption Survey," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 29-50.
    5. Timm Bönke & Markus Grabka & Carsten Schröder & Edward N. Wolff, 2017. "A Head-to-Head Comparison of Augmented Wealth in Germany and the United States," NBER Working Papers 23244, National Bureau of Economic Research, Inc.
    6. Ferrara, Maria & Tirelli, Patrizio, 2017. "Equitable fiscal consolidations," Economic Modelling, Elsevier, vol. 61(C), pages 207-223.

    More about this item

    Keywords

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

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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