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Wealth accumulation in Great Britain 1995-2005: The role of house prices and the life cycle

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  • Francesca Bastagli
  • John Hills

Abstract

This paper examines trends in the distribution of household wealth in Great Britain from 1995 to 2005 using the British Household Panel Survey (BHPS). The data show that wealth is very unevenly distributed and reveal a widening absolute gap over the period between wealthier households and those with no or negative wealth. However, in relative terms, wealth grew fastest for households in the middle of the distribution and inequality measured by the Gini coefficient decreased. This mainly reflected housing wealth becoming a greater share of total net worth, more equally distributed, and the highest percentage increase in housing wealth taking place in the middle of the distribution. To estimate the distributional impact of the remarkable rise in house prices which defined this period, we simulate the distribution of net 2005 wealth in the hypothetical scenario in which house prices remained at their 1995 levels in real terms and find that the reduction in wealth inequality is almost entirely accounted for by changes in house prices. The paper also finds that, controlling for factors such as age, households that gained most from the house price boom were mortgagors, in particular those that were initially wealthier, and were advantaged in other ways such as by level of educational qualification.

Suggested Citation

  • Francesca Bastagli & John Hills, 2012. "Wealth accumulation in Great Britain 1995-2005: The role of house prices and the life cycle," CASE Papers case166, Centre for Analysis of Social Exclusion, LSE.
    • Handle: RePEc:cep:sticas:case166
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    File URL: https://sticerd.lse.ac.uk/dps/case/cp/CASEpaper166.pdf
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    References listed on IDEAS

    as
    1. Kessler, Denis & Masson, Andre, 1988. "On five hot issues on wealth distribution," European Economic Review, Elsevier, vol. 32(2-3), pages 644-653, March.
    2. John Hills, 2007. "Ends and Means: The future roles of social housing in England," CASE Reports casereport34, Centre for Analysis of Social Exclusion, LSE.
    3. Eleni Karagiannaki, 2011. "The impact of inheritance on the distribution of wealth: Evidence from the UK," CASE Papers case148, Centre for Analysis of Social Exclusion, LSE.
    4. John Hills, 2010. "An Anatomy of Economic Inequality in the UK - Report of the National Equality Panel," CASE Reports casereport60, Centre for Analysis of Social Exclusion, LSE.
    5. repec:cep:sticas:/148 is not listed on IDEAS
    6. Karagiannaki, Eleni, 2011. "The impact of inheritance on the distribution of wealth: evidence from the UK," LSE Research Online Documents on Economics 43895, London School of Economics and Political Science, LSE Library.
    7. Hills, John & Brewer, Mike & Jenkins, Stephen P & Lister, Ruth & Lupton, Ruth & Machin, Stephen & Mills, Colin & Modood, Tariq & Rees, Teresa & Riddell, Sheila, 2010. "An anatomy of economic inequality in the UK: report of the National Equality Panel," LSE Research Online Documents on Economics 28344, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. Selçuk Bedük, 2023. "Insured Privately? Wealth Stratification of Job Loss in the UK," Social Inclusion, Cogitatio Press, vol. 11(1), pages 135-147.
    2. Selçuk Bedük, 2023. "Insured Privately? Wealth Stratification of Job Loss in the UK," Social Inclusion, Cogitatio Press, vol. 11(1), pages 135-147.

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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