Abstract
This study uses a matching method to provide an estimate of the nativity wealth gap among older households in Europe. This approach does not require imposing any functional form on wealth and avoids validity-out-of-the-support assumptions; furthermore, it allows estimation not only of the mean of the wealth gap but also of its distribution for the common-support sub-population. The results show that on average there is a positive and significant wealth gap between natives and migrants. However, the average gap may be misleading as the distribution of the gap reveals that immigrant households in the upper part of the wealth distribution are better off, and those in the lower part of the wealth distribution are worse off, than comparable native households. A heterogeneity analysis shows the importance of origin, age at migration, and citizenship status in reducing the gap. Indeed, households who migrated within Europe, those who moved at younger ages rather than as adults, and those who are citizens of the destination country display a wealth gap that is consistently smaller over the entire distribution.
Highlights
This study seeks to answer the question of how older migrants fare financially compared with natives
This study finds that the average wealth gap delivers a very partial picture of the gap between natives and migrants
In particular, may primarily count on three types of resources: social security income, pensions and private savings, and wealth. These resources may differ as a result of differences in inherited wealth, rates of return, or savings behavior, which in turn may depend on both the country of origin and destination country characteristics
Summary
This study seeks to answer the question of how older migrants fare financially compared with natives This is done by measuring the wealth gap between native and immigrant households across the wealth distribution. In particular, may primarily count on three types of resources: social security income, pensions and private savings, and wealth (see Sevak and Schmidt 2014). These resources may differ as a result of differences in inherited wealth, rates of return, or savings behavior, which in turn may depend on both the country of origin and destination country characteristics. As financial literacy starts in the family, as pointed out by Lusardi and Mitchell (2014), by observing parents’ saving and investing habits or from directly receiving financial education, it may well be that financial literacy is related to specific cultural or ethnic differences (see, for example, Haliassos et al 2016)
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