Abstract
The literature has typically found that the distribution of socioeconomic factors like education, labor status and income does not account for the remarkable wealth inequality disparities between countries. As a result, their different institutions and other latent factors receive all the credit. Here, we propose to focus on one type of wealth inequality, the inequality of opportunities (IOp) in wealth: the share of overall wealth inequality explained by circumstances like inheritances and parental education. By means of a counterfactual decomposition method, we find that imposing the distribution of socioeconomic factors of the USA into Spain has little effect on total, financial and real estate wealth inequality. On the contrary, these factors play an important role when wealth IOp is considered. A Shapley value decomposition shows that the distribution of education and labor status in the USA consistently increase wealth IOp when imposed into Spain, whereas the opposite effect is found for the distribution of income.
Highlights
Recent studies on wealth inequality have found a wide heterogeneity on the type of assets owned along the wealth distribution
We estimate first overall wealth inequality and wealth inequality of opportunities (IOp) and, apply the DFL method to decompose the differences of these two dimensions between Spain and the USA
Results are presented in two twin tables that share the same structure: first, we show overall wealth inequality and wealth IOp for Spain, the USA and the counterfactual
Summary
Recent studies on wealth inequality have found a wide heterogeneity on the type of assets owned along the wealth distribution. The sources of wealth disparities among countries have been, more elusive to find out. The comparison between the USA and some European countries has shown that covariates like education, labor status, household structure or income distribution do not explain the large cross-country differences in wealth inequality (Christelis et al 2013; Doorley and Sierminska 2017; Cowell et al 2018a). Aggregate disparities have been attributed to a wide variety of institutions and other latent factors. Why do socioeconomic factors not seem to account for wealth inequality disparities across countries? We propose to study the factors that condition the opportunities of individuals to accumulate wealth
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