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The Joint Distribution of Household Income and Wealth: Evidence from the Luxembourg Wealth Study

Listed author(s):
  • Markus Jantti
  • Eva Sierminska
  • Tim Smeeding

This report looks at the extent to which household net worth and disposable income are correlated across individuals. After having briefly discussed the importance of better information on household wealth for social policies, the paper describes the main features of the Luxembourg Wealth Study – a collaborative project to assemble existing micro-data on household wealth into a coherent database that aims to do for wealth what the Luxembourg Income Study has achieved for income– and some of the basic patterns highlighted by these data, while noting the important methodological features that affect comparability. The main bulk of the report focuses on the joint distribution of income and wealth. While the comprehensive definition of wealth used (i.e. including business equity) allows covering only five OECD countries, the analysis uncovers a number of patterns. In particular, household net worth and disposable income are highly, but not perfectly correlated across people within each country. Many of the people classified as income poor do have some assets, although both the prevalence of holding and the amounts are clearly lower than among the general population. While part of the positive association between disposable income and net worth reflects observable characteristics of households, such as age and education of the household head, a sizeable correlation remains even after controlling for these characteristics. Ce rapport examine la corrélation entre le patrimoine des ménages et leur revenu disponible. Après avoir brièvement évoqué l’importance d’une meilleure information sur les patrimoines pour les politiques sociales, le document décrit les principales caractéristiques du Luxembourg Wealth Study (LWS) – un projet mené pour réunir les micro-données existantes sur le patrimoine des ménages dans une base de données cohérente, visant à accomplir pour les patrimoines ce que le Luxembourg Income Study (LIS) a réussi pour les revenus. Le rapport décrit quelques aspects fondamentaux mis en relief par ces données, tout en notant les caractéristiques méthodologiques qui ont un effet sur la comparabilité internationale. La partie centrale du rapport se concentre sur la distribution conjointe du patrimoine et du revenu. Alors que la définition du patrimoine utilisée (incluant les actifs professionnels) permet de couvrir seulement cinq pays de l’OCDE, l’analyse révèle un nombre d’éléments. La corrélation entre patrimoine et revenu disponible des individus dans chaque pays est élevée mais pas pour autant parfaite. Beaucoup de personnes ayant un revenu inférieur au seuil de pauvreté ont un patrimoine positif, bien que les personnes dans cette situation et les montants détenus soient clairement plus faibles que pour la population dans son ensemble. Si une partie de la corrélation positive entre revenu et patrimoine révèle des caractéristiques observables des ménages, telles que l’âge et l’éducation des chefs de famille, il n’en demeure pas moins qu’une corrélation non négligeable subsiste même après avoir contrôlé l’effet de ces caractéristiques.

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Paper provided by OECD Publishing in its series OECD Social, Employment and Migration Working Papers with number 65.

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Date of creation: 28 May 2008
Handle: RePEc:oec:elsaab:65-en
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