IDEAS home Printed from https://ideas.repec.org/p/nzt/nztwps/23-01.html
   My bibliography  Save this paper

Estimating the Distribution of Wealth in New Zealand

Author

Listed:

Abstract

This paper discusses alternative methods to estimate the distribution of wealth in New Zealand. It develops a taxable income capitalisation method for estimating the distribution of wealth in New Zealand that is based on the approach of Saez and Zucman (2016; 2022) and adapted for New Zealand data sources, which we term “the New Zealand capitalisation method”. Internationally, taxable income capitalisation has been found to be a high-performing method for estimating asset holdings that generate taxable income flows, particularly towards the top of the wealth distribution where household surveys often undercount wealth. The New Zealand capitalisation method combines Inland Revenue taxable income administration data with Stats NZ’s Household Balance Sheet to give new estimates of the distribution of New Zealand individuals’ wealth. We present results for 2010, 2015, and 2018, and compare these distributions with those recorded by the Household Economic Survey (HES) 2018. Our method also allows for wealth estimates of smaller groups than can be reliably obtained through HES, including estimates of the wealth held by the top 0.1% of the wealth distribution. The New Zealand capitalisation method suggests more wealth at the top of the distribution than estimated by HES, which is consistent with similar work internationally. Results also show that wealth shares at the top of the distribution fell between 2010 and 2018, while at the same time the greatest increase in average wealth went to the top of the distribution.

Suggested Citation

  • Benjamin Ching & Tayla Forward & Oscar Parkyn, 2023. "Estimating the Distribution of Wealth in New Zealand," Treasury Working Paper Series 23/01, New Zealand Treasury.
  • Handle: RePEc:nzt:nztwps:23/01
    as

    Download full text from publisher

    File URL: https://www.treasury.govt.nz/sites/default/files/2023-04/twp23-01.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thomas Carver & Arthur Grimes, 2019. "Income or Consumption: Which Better Predicts Subjective Well‐Being?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(S1), pages 256-280, November.
    2. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 620-663.
    3. Scholz, John Karl, 1992. "A direct examination of the dividend clientele hypothesis," Journal of Public Economics, Elsevier, vol. 49(3), pages 261-285, December.
    4. Andreas Fagereng & Luigi Guiso & Davide Malacrino & Luigi Pistaferri, 2020. "Heterogeneity and Persistence in Returns to Wealth," Econometrica, Econometric Society, vol. 88(1), pages 115-170, January.
    5. Kopczuk, Wojciech & Saez, Emmanuel, 2004. "Top Wealth Shares in the United States, 1916-2000: Evidence From Estate Tax Returns," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(2), pages 445-487, June.
    6. Jacob Lundberg & Daniel Waldenström, 2018. "Wealth Inequality in Sweden: What can we Learn from Capitalized Income Tax Data?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(3), pages 517-541, September.
    7. Andreas Fagereng & Luigi Guiso & Davide Malacrino & Luigi Pistaferri, 2016. "Heterogeneity in Returns to Wealth and the Measurement of Wealth Inequality," American Economic Review, American Economic Association, vol. 106(5), pages 651-655, May.
    8. Arthur B. Kennickell & R. Louise Woodburn, 1999. "CONSISTENT WEIGHT DESIGN FOR THE 1989, 1992 AND 1995 SCFs, AND THE DISTRIBUTION OF WEALTH," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(2), pages 193-215, June.
    9. Sean Higgins & Nora Lustig & Andrea Vigorito, 2018. "The rich underreport their income: Assessing bias in inequality estimates and correction methods using linked survey and tax data," Working Papers 475, ECINEQ, Society for the Study of Economic Inequality.
    10. Philip Vermeulen, 2016. "Estimating the Top Tail of the Wealth Distribution," American Economic Review, American Economic Association, vol. 106(5), pages 646-650, May.
    11. Alvaredo, Facundo & Atkinson, Anthony B. & Morelli, Salvatore, 2018. "Top wealth shares in the UK over more than a century," Journal of Public Economics, Elsevier, vol. 162(C), pages 26-47.
    12. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," PSE-Ecole d'économie de Paris (Postprint) hal-03474044, HAL.
    13. Philip Vermeulen, 2018. "How Fat is the Top Tail of the Wealth Distribution?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 357-387, June.
    14. Nora Lustig, 2020. "The ``missing rich'' in household surveys: causes and correction approaches," Working Papers 520, ECINEQ, Society for the Study of Economic Inequality.
    15. Ana Cinta G. Cabral & Norman Gemmell & Nazila Alinaghi, 2021. "Are survey-based self-employment income underreporting estimates biased? New evidence from matched register and survey data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(2), pages 284-322, April.
    16. Katrine Jakobsen & Kristian Jakobsen & Henrik Kleven & Gabriel Zucman, 2020. "Wealth Taxation and Wealth Accumulation: Theory and Evidence From Denmark," The Quarterly Journal of Economics, Oxford University Press, vol. 135(1), pages 329-388.
    17. Laura Kawano, 2014. "The Dividend Clientele Hypothesis: Evidence from the 2003 Tax Act," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 114-136, February.
    18. Matthew Smith & Danny Yagan & Owen Zidar & Eric Zwick, 2019. "Capitalists in the Twenty-First Century," The Quarterly Journal of Economics, Oxford University Press, vol. 134(4), pages 1675-1745.
    19. Emmanuel Saez & Gabriel Zucman, 2020. "Trends in US Income and Wealth Inequality: Revising After the Revisionists," Working Papers halshs-03022102, HAL.
    20. Carlotta Balestra & Richard Tonkin, 2018. "Inequalities in household wealth across OECD countries: Evidence from the OECD Wealth Distribution Database," OECD Statistics Working Papers 2018/01, OECD Publishing.
    21. Laurent Bach & Laurent E. Calvet & Paolo Sodini, 2020. "Rich Pickings? Risk, Return, and Skill in Household Wealth," American Economic Review, American Economic Association, vol. 110(9), pages 2703-2747, September.
    22. Emmanuel Saez & Gabriel Zucman, 2016. "Editor's Choice Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data," The Quarterly Journal of Economics, Oxford University Press, vol. 131(2), pages 519-578.
    23. Simon H. Boserup & Wojciech Kopczuk & Claus T. Kreiner, 2016. "The Role of Bequests in Shaping Wealth Inequality: Evidence from Danish Wealth Records," American Economic Review, American Economic Association, vol. 106(5), pages 656-661, May.
    24. Jess Benhabib & Alberto Bisin & Shenghao Zhu, 2011. "The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents," Econometrica, Econometric Society, vol. 79(1), pages 123-157, January.
    25. Mazur, Mark J. & Plumley, Alan H., 2007. "Understanding the Tax Gap1," National Tax Journal, National Tax Association;National Tax Journal, vol. 60(3), pages 569-576, September.
    26. Jesse Bricker & Alice Henriques & Jacob Krimmel & John Sabelhaus, 2016. "Measuring Income and Wealth at the Top Using Administrative and Survey Data," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 261-331.
    27. Jesse Bricker & Alice Henriques & Jacob Krimmel & John Sabelhaus, 2016. "Estimating Top Income and Wealth Shares: Sensitivity to Data and Methods," American Economic Review, American Economic Association, vol. 106(5), pages 641-645, May.
    28. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 1-41.
    29. Sean Higgins & Nora Lustig & Andrea Vigorito, 2018. "The Rich Underreport Their Income: Assessing Biases In Inequality Estimates And Correction Methods Using Linked Survey And Tax Data," Commitment to Equity (CEQ) Working Paper Series 70, Tulane University, Department of Economics.
    30. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Post-Print hal-03474044, HAL.
    31. Matthew Smith & Owen Zidar & Eric Zwick, 2023. "Top Wealth in America: New Estimates Under Heterogeneous Returns," The Quarterly Journal of Economics, Oxford University Press, vol. 138(1), pages 515-573.
    32. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Correction to: Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 707-707.
    33. John Creedy & Jesse Eedrah, 2014. "The Role of Value Judgements in Measuring Inequality," Treasury Working Paper Series 14/13, New Zealand Treasury.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arun Advani & George Bangham & Jack Leslie, 2021. "The UK's wealth distribution and characteristics of high‐wealth households," Fiscal Studies, John Wiley & Sons, vol. 42(3-4), pages 397-430, September.
    2. Matthew Smith & Owen Zidar & Eric Zwick, 2020. "Top Wealth in America: New Estimates and Implications for Taxing the Rich," Working Papers 264, Princeton University, Department of Economics, Center for Economic Policy Studies..
    3. Paolo Acciari & Facundo Alvaredo & Salvatore Morelli, 2021. "The concentration of personal wealth in Italy 1995-2016," PSE Working Papers halshs-03226113, HAL.
    4. Andersen, Torben M. & Bhattacharya, Joydeep & Grodecka-Messi, Anna & Mann, Katja, 2022. "Pension reform and wealth inequality: evidence from Denmark," Working Paper Series 411, Sveriges Riksbank (Central Bank of Sweden).
    5. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 620-663.
    6. Yang, Xiaoliang & Zhou, Peng, 2022. "Wealth inequality and social mobility: A simulation-based modelling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 307-329.
    7. Carranza, Rafael & De Rosa, Mauricio & Flores, Ignacio, 2023. "Wealth inequality in Latin America," LSE Research Online Documents on Economics 119426, London School of Economics and Political Science, LSE Library.
    8. Thomas Blanchet, 2022. "Uncovering the Dynamics of the Wealth Distribution," Working Papers hal-03865295, HAL.
    9. Schularick, Moritz & Albers, Thilo & Bartels, Charlotte, 2022. "Wealth and its Distribution in Germany, 1895-2018," CEPR Discussion Papers 17269, C.E.P.R. Discussion Papers.
    10. Thilo N. H. Albers & Charlotte Bartels & Moritz Schularick, 2020. "The Distribution of Wealth in Germany, 1895-2018," ECONtribute Policy Brief Series 001, University of Bonn and University of Cologne, Germany.
    11. Jean-Baptiste Michau & Yoshiyasu Ono & Matthias Schlegl, 2023. "The Preference for Wealth and Inequality: Towards a Piketty Theory of Wealth Inequality," CESifo Working Paper Series 10824, CESifo.
    12. , Matteo & Yang, Li, 2023. "The Impact of Communist Party Membership on Wealth Distribution and Accumulation in Urban China," SocArXiv y4pwa, Center for Open Science.
    13. Gabriel Zucman, 2019. "Global Wealth Inequality," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 109-138, August.
    14. Daniel Waldenström, 2021. "Wealth and History: An Update," CESifo Working Paper Series 9366, CESifo.
    15. Zwick, Eric, 2023. "Comments on “Wealth inequality dynamics in Europe and the United States: Understanding the determinants” by Blanchet and Martínez-Toledano," Journal of Monetary Economics, Elsevier, vol. 133(C), pages 44-47.
    16. Jesse Bricker & Alice Henriques & Jacob Krimmel & John Sabelhaus, 2016. "Measuring Income and Wealth at the Top Using Administrative and Survey Data," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 261-331.
    17. Carranza, Rafael & De Rosa, Mauricio & Flores, Ignacio, 2023. "Wealth Inequality in Latin America," IDB Publications (Working Papers) 12906, Inter-American Development Bank.
    18. James B. Davies & Livio Di Matteo, 2021. "Long Run Canadian Wealth Inequality in International Context," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(1), pages 134-164, March.
    19. Mauricio De Rosa, 2022. "Accumulation, inheritance and wealth distribution: first estimates of the untold half," Documentos de Trabajo (working papers) 22-07, Instituto de Economía - IECON.
    20. Waldenström, Daniel, 2021. "Wealth and History: An Update," Working Paper Series 1411, Research Institute of Industrial Economics.

    More about this item

    Keywords

    wealth; distribution; inequality; capitalisation; New Zealand;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • N37 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Africa; Oceania

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nzt:nztwps:23/01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CSS Web and Publishing, The Treasury (email available below). General contact details of provider: https://edirc.repec.org/data/tregvnz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.