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Financial Wealth Inequality in the United States and Great Britain

  • James Banks
  • Richard Blundell
  • James P. Smith

In this paper the authors describe the household wealth distribution in the U.S. and the U.K., and compare both wealth inequality and the form in which wealth is held. Unconditionally, there are large differences in financial wealth between the two countries at the top fifth of the wealth distribution. Even after controlling for age and income differences between the two countries, the authors show that the median U.S. household accumulates more financial wealth than its U.K. counterpart. They explore a number of alternative reasons for these differences and reject some explanations as implausible. Some of the observed differences are due to what the authors refer to as "initial conditions," in particular previously high rates of corporate equity ownership in the U.S. and housing ownership among young British households. But since these differences existed even in the early 1980s, initial conditions only provide a partial explanation. One other partial explanation may be that due to forced and voluntary annuitization of retirement incomes, older British households face considerably less longevity risk.

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File URL: http://www.rand.org/content/dam/rand/pubs/drafts/2008/DRU2440.pdf
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Paper provided by RAND Corporation in its series Working Papers with number 01-01.

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Length: 67 pages
Date of creation: Feb 2001
Date of revision:
Handle: RePEc:ran:wpaper:01-01
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  1. James Banks & Richard Blundell & Agar Brugiavini, 1999. "Risk pooling, precautionary saving and consumption growth," IFS Working Papers W99/19, Institute for Fiscal Studies.
  2. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc.
  3. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 3-95, Wharton School Rodney L. White Center for Financial Research.
  4. Martin Browning & Thomas F. Crossley, 2000. "The Life Cycle Model of Consumption and Saving," Social and Economic Dimensions of an Aging Population Research Papers 28, McMaster University.
  5. Simon Burgess & Karen Gardiner & Stephen P. Jenkins & Carol Propper, 2000. "Measuring Income Risk," Discussion Papers of DIW Berlin 213, DIW Berlin, German Institute for Economic Research.
  6. Karen E. Dynan & Jonathan Skinner & Stephen Zeldes, 2000. "Do the rich save more?," Finance and Economics Discussion Series 2000-52, Board of Governors of the Federal Reserve System (U.S.).
  7. Chiuri, Maria Concetta & Jappelli, Tullio, 2003. "Financial market imperfections and home ownership: A comparative study," European Economic Review, Elsevier, vol. 47(5), pages 857-875, October.
  8. Orazio P. Attanasio & Guglielmo Weber, 1993. "Consumption Growth, the Interest Rate and Aggregation," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 631-649.
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