Household Net Wealth Research Articles

An Application of the Dagum Type III Model to Measure Household Net Wealth Inequality in Indonesia

Abstract This paper applies the Dagum Type III model to measure household net wealth inequality in Indonesia utilising data from the Indonesian Family Life Survey (IFLS) 1993–2014. The results are the distribution of household net wealth in Indonesia is right-skewed, with long-and sparse-hand tails that reflect a large proportion of households that have very low net wealth and a small proportion of households that have very high net wealth. Further, the inequality of household net wealth in Indonesia declined, as shown by the decrease in the Gini coefficient.

Changes in Household Wealth Over the Process of Widowhood Across European Countries.

Widowhood has been shown to decrease surviving spouses' economic well-being. However, previous research has focused mostly on income-related outcomes, and has been less attentive to the importance of wealth, the processual nature of spousal death, and cross-national variation. In this study, we assessed how total, housing, and nonhousing wealth changes over the process of widowhood across 11 European countries. Individual fixed-effects regressions and longitudinal data from the Survey of Health, Ageing and Retirement in Europe were used to estimate how household net total wealth, housing wealth, and nonhousing wealth changed 3 years prior and 6 or more years after spousal death relative to 4 or more years prior to widowhood in 11 European countries. In all countries, household net wealth stayed relatively constant across the widowhood process, except for Austria, the Czech Republic, and Poland, where wealth declines were observed especially in the years following death. However, we found declines in housing wealth over the widowhood process, including prior to spousal death, across most countries in our sample, particularly in Austria, France, Denmark, the Czech Republic, and Poland. Declines in housing wealth were generally not reflected by changes in nonhousing wealth but coincided with leaving homeownership and downsizing. Widowhood is associated with lower wealth, especially housing wealth, even in the years before spousal loss. Future research should focus on adjudicating the mechanisms behind country differences and exploring the implications of lost wealth following widowhood for surviving spouses' well-being and intergenerational transfers.

Interprovincial Wealth Inequality by Factor Components in Indonesia

This paper investigates three issues related to interprovincial inequality in household net wealth in Indonesia. First, it assesses whether inequality is dominated by inequality within or between provinces. Second, it identifies the determinants of inequality. Third, it looks at the clubs of regions formed owing to convergence or divergence in household net wealth growth in Indonesia. Using data from five waves of the Indonesian Family Life Survey, we found declining inequality in household net wealth in Indonesia, dominated by inequality within provinces. Education is the biggest equalising variable for inequality in household net wealth in Indonesia. Using a club convergence approach, we also found that growth in household net wealth converged within one club and that two clubs converged over time.

Household Size and Household Wealth in Indonesia with the Influence of Spatial Aspects

Investigating household wealth should also include spatial analysis to capture the influence of location on the households’ net wealth and to avoid underestimation of the effect of the change of variables due to estimation that ignores spatial aspects. This paper examines factors influencing household net wealth in Indonesia with the influence of spatial lag using data from the Indonesian Family Life Survey (IFLS) for 1993–2014. The article relies on the Spatial Durbin Model (SDM) to analyze the data. Results show that household net wealth in Indonesia is spatially related to each other, and the spillover effect makes the change of household net wealth in Indonesia dominated by the change of variables in neighbouring regions. Furthermore, considering the time component, there is a positive effect of households’ size on households’ net wealth due to the time component concerning the spatial lag of the dependent and independent variables.

Examining the relationship between household wealth and colorectal cancer screening behaviors among U.S. men aged 45–75

Colorectal cancer (CRC) is the third leading cause of cancer-related death among men in the United States (U.S.), particularly among men aged 45 years and older. Early-detection screening remains a key method of decreasing CRC-related deaths, yet socioeconomic barriers exist to planning and completing CRC screening. While accumulating evidence shows income disparities in CRC screening prevalence, a dearth of research has investigated wealth disparities. This study aimed to determine whether household wealth was associated with CRC screening uptake and future screening intent. In February 2022, we sent an online survey to potential participants; U.S. men aged 45–75 years were eligible to participate. We examined four CRC screening behaviors as outcomes: ever completing a stool-based or exam-based screening test, current screening status, and future screening intent. Household net wealth, determined by self-reported household wealth and debt, was the primary predictor. We used logistic regression to estimate odds ratios (ORs) and their 95% confidence interval (CI). Of the study participants (N = 499), most self-identified as Non-Hispanic White, were aged 50–64 years, and had previously completed a CRC screening test. Results revealed that, among men aged 45–49 years, higher net wealth decreased the odds of ever completing a stool- or exam-based test (OR = 0.58, 95% CI: 0.33, 0.98; OR = 0.55, 95% CI: 0.31, 0.94, respectively). By contrast, among men aged 50–75 years, higher net wealth increased the odds of being current with CRC screening (OR = 1.40, 95% CI: 1.03, 1.92). Net wealth was unassociated with CRC screening intent. These findings suggest that household net wealth, rather than income, is an important socioeconomic factor to consider in relation to uptake of CRC early-detection screening. The financial and social cognitive mechanisms linking household wealth to CRC screening behaviors merit future research and intervention.

On the Monotonically Increasing Effect of Trust on Chinese Household Wealth

ABSTRACT This paper studies the relationship between trust and household wealth. Using cross-sectional data from the China Family Panel Studies, we find a monotonically positive effect of trust on household net wealth while controlling for economic, demographic, geographic, and psychological factors and correcting for endogeneity problems. Furthermore, we find that highly trusting individuals are less likely to be cheated in our sample. These results are in contrast with existing studies that establish a hump-shaped curve between trust and individual net worth. We attribute the difference to culture. Through more thorough analysis, we find that the positive effect of trust on wealth is mediated through participation in financial markets.

Household Size, Education, and Household Wealth in Indonesia: Evidence from Quantile Regression

Households need to have certain characteristics related to the ideal household size and educational attainment that allow them to accumulate wealth as a financial buffer for a period of low income. Investigation to discover those characteristics should be aimed at household classes as different classes may show various responses to the change of factors, hence, this also implies government’s interventions should be carefully aimed at different classes. In this paper, I use a quantile regression approach to measure the impact of household size and educational level on household net wealth in Indonesia. The findings show the positive and significant effect of the variable of household size in low deciles but a negative and significant effect in high deciles while the education aspect has a positive and significant effect on household net wealth with a stronger effect found in higher deciles.

Does Household Debt Matter to Financial Fragility?

ABSTRACT Minsky, the father of the financial instability hypothesis was concerned with how instability in business sector balance sheets could contribute to overall financial instability. Minsky did not consider the household balance to be important, and until 1990 taking that perspective was not problematic. However, as the level of household net wealth increased significantly through the 1990s, the household sector became an important player in the financial sector balances game. This article analyzes the role of household debt in economic growth from the post-Keynesian approach. We find that household debt does matter to financial stability. It influences the consumption levels of households, the rate of return on mortgage and other debt held by banks and other financial institutions, the rate of return on the production of goods and services, and the overall well-being of households in our economy. The issue of household debt can be tackled from two sides. From the income side, creating a work environment favorable to unions and a job guarantee program would help. From the expenditure side, providing Medicare, childcare, eldercare, higher education, and potentially housing, would remove the reasons why household acquire sometimes unsustainable debt.

Socioeconomic Inequality in the Use of Long-Term Care among European Older Adults: An Empirical Approach Using the SHARE Survey.

The increase in the proportion of elderly people in developed societies has several consequences, such as the rise in demand for long-term care (LTC). Due to cost, inequalities may arise and punish low-income households. Our objective is to examine socioeconomic inequalities in LTC utilization in Europe. We use the last wave from the Survey of Health, Aging, and Retirement in Europe SHARE (Munich Center for the Economics of Ageing, Munich, Germany), dated 2017, to analyze the impact of socioeconomic status (SES) on LTC. For this purpose, we construct logistic models and control for socioeconomic/household characteristics, health status, and region. Then, concentration indices are calculated to assess the distribution of LTC. Moreover, we also analyze horizontal inequity by using the indirect need-standardization process. We use two measures of SES (household net total income and household net wealth) to obtain robust results. Our findings demonstrate that informal care is concentrated among low-SES households, whereas formal care is concentrated in high-SES households. The results for horizontal concentration indices show a pro-rich distribution in both formal and informal LTC. We add new empirical evidence by showing the dawning of deep social inequalities in LTC utilization. Policymakers should implement policies focused on people who need care to tackle socioeconomic inequalities in LTC.

Private Wealth Across European Countries: The Role of Income, Inheritance and the Welfare State

Using microdata from the Household Finance and Consumption Survey (HFCS), this study examines the role of inheritance, income and welfare state policies in explaining differences in household net wealth within and between euro area countries. First, about one-third of the households in the 13 European countries we study report having received an inheritance, and these households have considerably higher net wealth than those which did not inherit. Second, regression analyses on households' relative wealth position show that, on average, having received an inheritance lifts a household by about 14 net wealth percentiles. At the same time, each additional percentile in the income distribution is associated with about 0.4 net wealth percentiles. These results are consistent across countries. Third, multilevel cross-country regressions show that the degree of welfare state spending across countries is negatively correlated with household net wealth. These findings suggest that social services provided by the state are substitutes for private wealth accumulation and partly explain observed differences in levels of household net wealth across European countries. In particular, the effect of substitution relative to net wealth decreases with growing wealth levels. This implies that an increase in welfare state spending goes along with an increase—rather than a decrease—of observed wealth inequality.

A Not-So-Great Recovery in Consumption: What is Holding Back Household Spending?

Historically, aggregate consumption has closely tracked disposable personal income, government transfers, and household net wealth. In this note, we show that this empirical relationship has broken down in recent years and explore potential explanations for why consumers--at least in the aggregate--may not be spending in line with recent income and wealth gains.

“Family Achievements?”: How a College Degree Accumulates Wealth for Whites and Not For Blacks

A college education has been linked to higher life-time earnings and better economic achievements, so the expectation would be that it is also linked to higher net wealth for everybody. However, recent analyses challenge this hypothesis and find that the expectation holds true for White college-educated households but not for Black college-educated households. To examine this finding further and investigate the role of family financial transfers in household net wealth, the authors perform a mixed-method study using data from the Panel Study of Income Dynamics for a 24-year period, 1989-2013, and qualitative data from the Institute on Assets and Social Policy Levering Mobility study. Their results confirm that White college-educated households amass wealth, whereas the wealth of their Black counterparts declines. The authors also estimate the impact of just inheritance or large financial gifts and find that they decrease the existing racial wealth gap by nearly $40,000, or 20 percent. Further analyses demonstrate that White college graduates are significantly and substantially more likely to provide and receive financial support for education and/or a home purchase, while Black college graduates are significantly more likely to financially support their parents. Multivariate regression analysis identifies receipt of financial support for education and a home purchase as a positive contributor to net wealth and financial help for parents as a negative contributor to net wealth, disadvantaging Black college-educated households, who are less likely to receive and more likely to give financial support. Longitudinal interview data collected in the Institute on Assets and Social Policy Leveraging Mobility study illustrate the mechanisms of family financial transfers and their relationship to wealth accumulation, contrasting the White and Black households’ experiences. The discussion underscores the need to better understand intergenerational wealth and wealth sharing within families when studying wealth outcomes and highlights the role of family financial wealth transfers in creating opportunities for those who benefit the most—mostly White college-educated households.

Household wealth in the euro area: The importance of intergenerational transfers, homeownership and house price dynamics

Results from the Eurosystem Household Finance and Consumption Survey reveal substantial variation in household net wealth across euro area countries that await explanation. This paper focuses on three main factors: (i) homeownership, (ii) housing value appreciation and (iii) intergenerational transfers. We show that these three factors, in addition to the common household and demographic factors, are relevant for the net wealth accumulation process in all euro area countries, and that, using various decomposition techniques, differences in homeownership rates and house price dynamics are important for explaining wealth differences across euro area countries.

Disaggregated South African household net wealth: A mixed methods approach

This article addresses the paucity of disaggregated household net wealth data in South Africa. A mixed methods approach was followed to develop and conduct a country-specific household net wealth measurement survey. A disaggregated household typology of assets and liabilities, based on international net wealth surveys, was developed. Focus group research was employed in the qualitative strand to finalise the survey. In the quantitative strand, disaggregated micro-level data estimates from 2 606 households were collected and the article presents the cursory findings. A comparison is drawn between the survey’s main asset and liability estimates with data estimates presented in the South African Reserve Bank’s household balance sheet. These estimates were constructed from macro-level data estimates and lack information on the disaggregated composition of household net wealth. Furthermore, the conceptual linkages and differences between the micro and macro data estimates are described. The manner in which differences in the concepts, construction methods and potential survey errors contributed to differences between the two sets of data estimates is also indicated. The aim of the research was to contribute to the field of household finances from the perspective of a developing country. Therefore, the process followed to construct and validate the survey instrument and data estimates could assist other developing countries to develop their own surveys. Disaggregated net wealth data estimates could assist policy-makers with the overview and management of a country’s household net wealth.

The influence of employment and occupation on a household's net equity

Many South Africans are faced with the reality of poverty. Studies have shown that one of the best ways to alleviate poverty is through employment. Considering South Africa’s high unemployment rate, it is clear that unemployment contributes to poverty and low household net wealth. Using data obtained from a representative omnibus sample, this paper analysed the effect of employment status on a household’s net equity (assets minus liabilities). Whilst being employed did statistically significantly influence the household’s net equity, there was an almost equal distribution of households over the net equity quintiles, indicating that employment status alone is not a guarantee of economic emancipation. In order to determine the cause of the equal distribution, the paper investigated whether the occupation in which a person is employed might assist in explaining the differences in the net equity values. It was found that being employed in certain occupations did to a statistically significant degree explain the differences in the net equity of households, with the households of persons employed in scarce skills occupations, on average, having a significantly higher net equity than the households of persons employed in a non-scarce skills occupation.

Control thyself: Self-control failure and household wealth

We examine the relationship between household wealth and self-control. Although self-control has been linked to consumption and financial behavior, its measurement remains an open issue. We employ a definition of self-control failure that follows literature in psychology, suggesting that three factors can render self-control defective: lack of planning, lack of monitoring, and lack of commitment to pre-set plans. Our measure combines those three ingredients and can be computed using a standard representative survey. We find that self-control failure is strongly associated with different household net wealth measures and with self-assessed financial distress.

Distributional consequences of asset price inflation in the Euro Area

We study the distributional consequences of housing price, bond price and equity price increases for Euro Area households using data from the Household Finance and Consumption Survey (HFCS). The capital gains from bond price and equity price increases turn out to be concentrated among relatively few households, while the median household strongly benefits from housing price increases. The capital gains from bond price increases (relative to household net wealth) do not correlate with household net wealth (or income). Bond price increases thus leave net wealth inequality largely unchanged. In contrast, equity price increases largely benefit the top end of the net wealth (and income) distribution, thus amplify net wealth inequality. Housing price increases display a hump shaped pattern over the net wealth distribution, with the poorest and richest households benefitting least, but there exists considerable heterogeneity across Euro Area countries. The ECB's OMT announcements over the summer of 2012 had quantitatively similar distributional implications as an unexpected loosening of the policy rate by about 175 basis points.

Drivers of wealth inequality in euro area countries: the effect of inheritance and gifts on household gross and net wealth distribution analysed by applying the Shapley value approach to decomposition

This paper investigates the sources of inequality in household gross and net wealth across eight euro area countries applying the Shapley value approach to decomposition. The research draws on micro data from the Eurosystem Household Finance and Consumption Survey 2010. Dispersion in bequests and inter vivos transfers obtained by households are found to have a remarkable effect on wealth inequality that is stronger than that of income differences. In Austria, Germany and Cyprus the contribution of real and financial assets inherited or received as gifts to gross and net wealth inequality attains about 40 per cent. Nevertheless, the distribution of household characteristics (age, education, size, number of adults and children in the household, marital status) within countries also shapes the observed wealth dispersion.

Rich Pickings? Risk, Return, and Skill in Household Wealth

We investigate wealth returns on an administrative panel containing the disaggregated balance sheets of Swedish residents. The expected return on household net wealth is strongly persistent, determined primarily by systematic risk, and increasing in net worth, exceeding the risk-free rate by the size of the equity premium for households in the top 0.01 percent. Idiosyncratic risk is transitory but generates substantial long-term dispersion in returns in top brackets. Systematic and idiosyncratic risk both drive the cross-sectional distribution of the geometric average return over a generation. Furthermore, wealth returns explain most of the historical increase in top wealth shares. (JEL D31, G11, G51)

Private Wealth Across European Countries: The Role of Income, Inheritance and the Welfare State

Using microdata from the Household Finance and Consumption Survey (HFCS), this study examines the role of inheritance, income and welfare state policies in explaining differences in household net wealth within and between euro area countries. First, about one third of the households in the 13 European countries we study report having received an inheritance, and these households have considerably higher net wealth than those which did not inherit. Second, regression analyses on households' relative wealth position show that, on average, having received an inheritance lifts a household by about 14 net wealth percentiles. At the same time, each additional percentile in the income distribution is associated with about 0.4 net wealth percentiles. These results are consistent across countries. Third, multilevel cross-country regressions show that the degree of welfare state spending across countries is negatively correlated with household net wealth. These findings suggest that social services provided by the state are substitutes for private wealth accumulation and partly explain observed differences in levels of household net wealth across European countries. In particular, the effect of substitution relative to net wealth decreases with growing wealth levels. This implies that an increase in welfare state spending goes along with an increase - rather than a decrease - of observed wealth inequality. JEL Classification: D30, D31