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The distribution of wealth in the U.S. and Spain: the role of socio-economic factors

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  • Pedro Salas-Rojo

    (Universidad Complutense de Madrid, Spain)

  • Juan Gabriel Rodríguez

    (Universidad Complutense de Madrid, Spain)

Abstract

The literature has typically found that socio-economic factors (age, education, income, labor status, household structure) are irrelevant to explain the large cross-country disparities in wealth. As a result, institutions and other unobserved factors have received all the credit. Here, we propose to focus on one type of wealth inequality, the part of overall wealth inequality that is explained by parental background and inheritances (inequality of opportunity -IO- in wealth). By means of a counterfactual decomposition method (DiNardo et al., 1996), we show that imposing the distribution of socio-economic factors in the U.S. (2016) into Spain (2014) has little effect on overall wealth inequality. However, socio-economic factors play an important role when wealth IO is considered. Moreover, the Shapley decomposition shows that the distribution of age, education and income in the U.S. contribute to increase wealth IO in the counterfactual, whereas the opposite happens with the distribution of labor status and household structure. These results are robust to different types of wealth (total, financial or real state), inequality indices (MLD or Gini coefficient), IO measures (absolute or relative) and samples (total or above 55 years).

Suggested Citation

  • Pedro Salas-Rojo & Juan Gabriel Rodríguez, 2019. "The distribution of wealth in the U.S. and Spain: the role of socio-economic factors," Working Papers 506, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2019-506
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    More about this item

    Keywords

    wealth inequality; socio-economic factors; inequality of opportunity in wealth; United States; Spain.;
    All these keywords.

    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

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