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Wealth levels
Figure 1 compares average household wealth in the late 1990s and early 2000s. European countries are grouped to the left and other countries to the right. According to the measure of net worth used (assets less liabilities) in Europe, there are striking differences between countries in average wealth - it is four times larger in Italy (the country with the highest level) than in Finland (the country with the lowest level). Spain and Portugal also have relatively high levels.
Figure 1: Mean net worth, late 1990s-early 2000s (EUR 000, at 2007 prices)
Average wealth in other, non-European, countries is, for the most part, larger than that in Spain. There is also a big difference in the US in the measurement of average wealth on the basis of different surveys. This difference depends on a relatively small number of wealthy households, since it is no longer evident in the figures for the median level of wealth.
As differences in sample design (and, in particular, whether or not the wealthy are oversampled) can affect results markedly, comparisons of median rather than mean levels of wealth are likely to be more reliable. Figure 2 shows the results of such a comparison. It should be noted that there is far more evidence on the typical or 'median' household in non-European than in European countries. Median net worth in European countries is much closer to that in non-European ones, and the differences between them are smaller. The ranking of countries, however, changes: for example, the ranking of Sweden increases and that of the UK slips, while in non-European countries the level in Japan is much higher than in any other country, and is twice as high as in the US (in stark contrast to the mean levels). Some idea of the extreme wealth inequality in the US can also be gained by noting that median US net worth is only slightly higher than in Sweden, whereas the mean was 2.5-3 times more (Table 1).
Figure 2: Median net worth, late 1990s-early 2000s (EUR 000, at 2007 prices)
It is possible that, in some European countries, the low levels of net worth and the differences between countries can partly be explained by the presence of statutory earnings-related pensions.[1] While the details vary from country to country, and also change over time within the individual countries, the existence of pension legislation that makes future benefits a function of earnings or, in some cases, lifetime earnings (e.g. Sweden and Finland) will almost certainly affect the perceived need for savings and therefore for wealth accumulation. A partial correction for this in cross-national studies would be to use labour market characteristics to impute some measure of the net present value of future expected pensions for those who have not yet retired. Such corrections are not possible without access to individual-level microdata, which up to now have rarely been available.
In addition, some surveys do not collect information on private pensions, which could add a substantial amount to aggregate wealth. For example, based on the data in the UK, the inclusion of pensions is estimated to add around EUR 200,000 to average net worth and around EUR 100,000 to the median (see Table 1).
Because of the non-negligible differences in the potential definitions of net worth, it may be more meaningful to examine the most comparable specific components of net worth across countries - for example, the value of the main residence. This is the main component of assets in most countries, amounting to roughly two-thirds of the value of the wealth portfolio. In Europe, the highest average home values are in Italy, the UK, Sweden, Germany and Finland.
The rankings are changed if average values for homeowners (rather than for the whole population, as above) are compared, because of differences in ownership rates across countries. In their five-country study, Bicakova and Sierminska (2008) find that the highest home values among homeowners are in Germany, the UK and Italy, followed by the US and Finland. The same is the case for medians as for the means.
As regards debt, levels in the European countries covered are lower than in the non-European ones.
Changes in wealth levels
According to the data available, wealth increased in the early 2000s in three of the four countries for which there are data, the exception being the US. The increase was particularly marked in the UK (Table 2).
1] This is the case for Australia and Germany, for example. Frick and Headey (2009) show that without the inclusion of pension entitlement, average wealth in Australia is more than twice that in Germany, but once entitlement is taken into account it is much the same.
