Wealth distribution

Evidence on the distribution of wealth between households is provided by two international studies on wealth inequality. The Davies et al. (2008) study assembles estimates clustered around the year 2000. The sources of these data are mostly household surveys, but there are three from wealth registers (Denmark, Sweden and Switzerland) and two from estate multiplier estimates (France and the UK). The Luxembourg Wealth Study (LWS) is a data archive of household surveys, the goal of which is to harmonise wealth and income data in order to provide a definition of wealth that is comparable across countries. It should be noted that, in order to achieve a common wealth definition across countries, some components (such as business assets and pension accounts) have not been included in the figures presented in Table 3. In addition, survey techniques differ across countries (for example, some include the very rich and others do not). Care must, therefore, be taken when comparing two estimates of the same statistics, because aspects of the data may limit their comparability.

The results of these studies are summarised in Table 3. To give an indication of the differences in the distribution of wealth and income, the Gini coefficient for household disposable income from the Luxembourg Income Study (LIS) is included in the last column. Note that the coefficient for income is half (or often only a third) the size of the coefficient for wealth, suggesting much greater wealth inequality and confirming the characteristics of wealth distribution: significant skewness and a large concentration of very low and zero values.

The Gini coefficients for wealth distribution in Davies et al. (2008) and the LWS show similarities as well as differences (which may be the result of different surveys, different definitions of wealth or different survey years). The two sets of Gini coefficients suggest a similar ranking of the countries, but different magnitudes. For instance, Sweden has the highest Gini coefficient in the LWS and the second-highest in the EU in the estimates of Davies et al. (2008). At the same time, it has one of the lowest levels of average wealth based on the mean and median results. On all available measures, Finland has one of the lowest levels of net worth inequality and the US one of the highest.

These differences in the levels of net worth inequality from different sources underline the importance of allowing researchers to make their own data definitions and their own choices, using microdata from several countries, when they draw conclusions about wealth levels and distribution.

The picture revealed by the 'top shares' is similar to that shown by the Gini coefficient. According to the LWS, Sweden has the highest share of wealth held by the top 10% in Europe, followed by Germany and the UK, Finland and Italy.

Sweden and Germany appear to be the most unequal countries in Europe in terms of wealth distribution, which is not at all the case in terms of income. One of the reasons for this is that a large proportion of households have very little or negative wealth - in Germany around 38% and in Sweden 32% (Sierminska et al., 2006). Low wealth levels can reflect measurement errors, but also the low rates of home ownership (in Germany) and high debt (in Sweden), as well as the dampening effect of public pensions on savings.[1]

[1] On pensions, see Domeij and Klein (2002) for Sweden and Frick and Headey (2009) for Germany.