Decomposing wealth inequalities in the wake of the Greek debt crisis

Abstract

While Greece has been the epicentre of economic research on many dimensions after its deep and prolonged crisis, wealth inequalities remain understudied. Our paper explores the levels, distribution, composition, and dynamics of household wealth in the aftermath of the Global Financial Crisis. We find large asymmetries in the allocation of wealth in Greece: the richest 1% of the population holds roughly as much wealth as the poorest 50%, while the richest 10% holds about four times the wealth of the poorest 50%. In addition, wealth inequality in Greece has increased between 2009 and 2017. At the same time, both average and median wealth shrunk by one third, while the share of wealth-poor and hand-to-mouth households increased by about 20%. Our factor inequality decompositions suggest that, despite being relatively evenly distributed, real wealth holdings caused much of the increasing trends in wealth disparities in the country. Conversely, while highly unequally distributed themselves, financial assets played an insignificant role in the wealth dynamics. The findings of the paper carry implications for the design of appropriate policies aiming to increase household resilience and underline the role of asymmetries in real and financial asset holdings for the effectiveness of economic policies.