Wealth Inequality and Homeownership in Europe

Abstract

The recently published Household Finance and Consumption Survey has revealed large differences in wealth inequality between the countries of the Euro area. We document a strong negative correlation between wealth inequality and homeownership rates across countries. We show that this negative relationship is robust to controlling for other observables using a counterfactual decomposition of cross-country inequality differences based on a recentered influence function regression. Furthermore, by decomposing the Gini coefficient across owners and renters we argue that the negative relationship is mostly driven by large inequality between the two groups. We also find that the cross-country differences in the homeownership rate and its negative correlation with wealth inequality are to a large extent driven by households in the lower half of the wealth distribution. Thus, not only the top percentiles but also the lower tail is important in accounting for overall wealth inequality.