Asset Inequality in MENA: The Missing Dimension?

Studies of economic inequality have traditionally relied on income or consumption as their welfare aggregate. This is problematic, because households choose their labor market participation, and smooth their consumption over time based on their wealth. Neither income nor consumption measures welfare or inequality perfectly. Wealth must be accounted for as an economic outcome as well as a driver of lifetime opportunities. Since wealth is distributed more widely, and is related positively to income and consumption, overall inequality is likely to exceed inequality measured by income or consumption alone. We use panel surveys and wealth indexes based on productive and non-productive household assets to examine economic inequality in four MENA countries – Egypt, Ethiopia, Jordan and Tunisia. Wealth distribution and households’ economic mobility are evaluated across surveys. To mitigate ordinality of wealth indexes, they are benchmarked by applying relative asset prices estimated in one survey to other surveys. We report the degree of wealth inequality within and across countries, and across regional and demographic dimensions. In Egypt and Ethiopia, households’ revealed welfare changes over time are discussed. Wealth distributions are juxtaposed with the distributions of household earnings and consumption to gauge the degree of multidimensional inequality. The relationship between productive and non-productive assets is assessed. We find that the wealth index is distributed widely in Ethiopia and Tunisia, and more moderately in Egypt and Jordan. Wealth is subject to great urban–rural and educated-uneducated gaps. In Egypt and Ethiopia wealth rose for the majority of households over time, making them better off, but consistently fell for the poorest ventile. Wealth and earnings are positively correlated for individual households, but have different aggregate distributions, subject to different trends over time. Finally, productive and non-productive assets are substitutes bought by different households for different purposes, with different implications for welfare and inequality.