Abstract
AbstractWe show that wealth inequality in the UK is high and has increased slightly over the past decade as financial asset prices have increased in the wake of the financial crisis. But data deficiencies are a major barrier in understanding the true distribution, composition and size of household wealth. The most comprehensive survey of household wealth in the UK does a good job of capturing the vast majority of the wealth distribution, but nearly £800 billion of wealth held by the very wealthiest UK households is missing. We also find tentative evidence that survey measures of high‐wealth families undervalue their assets – our central estimate of the true value of wealth held by households in the UK is 5 per cent higher than the survey data suggest.
Highlights
In high-income Western economies during much of the twentieth century, economic questions of distribution – of income or other variables – seemed of secondary importance to those of macroeconomic growth (Lucas, 1988; Krugman, 1997)
Relative to previous estimates on top wealth for the UK (Vermeulen, 2018), our top wealth adjustment uses a relatively large sample of top wealth observations (1000 in the Sunday Times Rich List (STRL)), and our Pareto adjustment focuses on adjusting business wealth from the Wealth and Assets Survey (WAS), which we argue is more closely related to what is being measured in the top wealth data
In Appendix A we show that the level and dynamics of wealth inequality in recent years depends on the definition of wealth used
Summary
In high-income Western economies during much of the twentieth century, economic questions of distribution – of income or other variables – seemed of secondary importance to those of macroeconomic growth (Lucas, 1988; Krugman, 1997). There exist a number of existing aggregate wealth series for the UK, including based on the national accounts (World Inequality Database, n.d.), inheritance tax records (HMRC, 2005; Alvaredo, Atkinson and Morelli, 2018) and the Wealth and Assets Survey (ONS, 2019a; Credit Suisse, 2019) These series reach quite different results as to total wealth in the UK (Advani, Chamberlain and Summers, 2020b), in part because they have different target definitions of wealth. Researchers wishing to study the wealth distribution have access to a number of possible data sources: household surveys, administrative data from income and inheritance tax, and lists of large wealth-holders (Alvaredo, Atkinson and Morelli, 2016; Crawford, Innes and O’Dea, 2016). The conclusion summarises our findings and their implications for the rest of the project
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