Household Net Worth Research Articles

Aggregate Asset Growth and Expected Stock Returns

This paper suggests a novel approach for predicting aggregate stock returns at quarterly and annual frequencies. Weak return predictability of macroeconomic and financial variables is consistent with the view that expected returns are time-varying and highly persistent. Taking a first difference of returns nearly cancels out expected returns. A variable that is correlated with innovations in expected returns can be used to forecast changes in returns. Using aggregate asset growth (growth of household net worth) as a predictive variable delivers better out-of-sample forecasts for aggregate stock returns compared to other predictors, suggesting that the variable contains information regarding these innovations.

Failure to Launch: Housing, Debt Overhang, and the Inflation Option During the Great Recession

Can inflation cure mortgage debt overhang and mitigate the severity of housing busts? Focusing on the Great Recession, I address this question through the lens of a quantitative macroeconomic model of illiquid housing, endogenous mortgage pricing, and equilibrium default. First, I show that an increase in financial frictions accounts for half of the drop in real house prices, household net worth, and consumption during the Great Recession. However, a shock to housing liquidity is key to explaining the drop in housing sales, the increase in average time on the market, and the persistence of high foreclosure sales. A temporary surge of inflation leads to a moderate improvement in real house prices and inflation, though the endogenous contraction of mortgage credit partially offsets the direct debt erosion. However, a policy of nominal price level targeting that institutes high initial inflation followed by an extended disinflation leads to more promising results.

Household net worth, racial disparities, and hormonal therapy adherence among women with early-stage breast cancer.

Nonadherence to adjuvant hormonal therapy is common and is associated with increased prescription copayment amount and black race. Studies suggest that household wealth may partly explain racial disparities. We investigated the impact of net worth on disparities in adherence and discontinuation. We used the OptumInsight insurance claims database to identify women older than age 50 years diagnosed with early breast cancer, from January 1, 2007, to December 31, 2011, who were using hormonal therapy. Nonadherence was defined as a medication possession ratio of ≤ 80% of eligible days over a 2-year period. We evaluated the association of demographic and clinical characteristics, annual household income, household net worth (< $250,000, $250,000 to $750,000, or > $750,000), insurance type, and copayments (< $10, $10 to $20, or > $20) with adherence to hormonal therapy. Logistic regression analyses were conducted by sequentially adding sociodemographic and financial variables to race. We identified 10,302 patients; 2,473 (24%) were nonadherent. In the unadjusted analyses, adherence was negatively associated with black race (odds ratio [OR], 0.76; P < .001), advanced age, comorbidity, and Medicare insurance. Adherence was positively associated with medium (OR, 1.33; P < .001) and high (OR, 1.66; P < .001) compared with low net worth. The negative association of black race with adherence (OR, 0.76) was reduced by adding net worth to the model (OR, 0.84; P < .05). Correcting for other variables had a minimal impact on the association between race and adherence (OR, 0.87; P = .08). The interaction between net worth and race was significant (P < .01). We found that net worth partially explains racial disparities in hormonal therapy adherence. These results suggest that economic factors may contribute to disparities in the quality of care.

Comparing Micro and Macro Sources for Household Accounts in the United States: Evidence from the Survey of Consumer Finances

Household income, spending, and net worth are key inputs in macroeconomic forecasting and economic research. Macro-level data sources are often used to measure household accounts, but lack important information about heterogeneity across different types of households that can be found in micro-level data sources. This paper compares aggregates computed based on one micro-level data source--the Survey of Consumer Finances (SCF)--with macro-level sources of information on household accounts. We find that on most measures, aggregates computed from the SCF line up well with macro-level data sources once we construct comparable series. Our results imply that researchers and policy makers can be confident in making macroeconomic inferences from household-level surveys like the SCF.

Savings From Ages 16 to 35: A Test to Inform Child Development Account Policy

This study examines savings from childhood to young adulthood with a sample of 14,223 individuals from the 1996 Survey of Income and Program Participation (SIPP). We employed a cohort sequential accelerated latent growth model that combined a series of cohorts to represent a common developmental trajectory spanning 19 years—ages 16–35—and accounted for relevant covariates. Descriptively, the proportions of savings account ownership increased steadily between ages 16 and 30 and then leveled off. In other words, a critical time for intervention may occur between ages 16 and 30 when the proportion of account ownership is increasing. Proportions of savings accumulation also rose steadily, with a mean low of $636 between ages 16 and 20 to a mean high of $1,160 between ages 31 and 35. Gender, race, employment status, and household income and net worth were associated with initial variability in savings at ages 16–20 and rate of change in savings over time through age 35. Results can inform policies and programs that open savings accounts for children as a way of helping them remain financially secure across their life course.

Household Risk Management

Household risk management, that is, households' insurance against adverse shocks to income, assets, and financing needs, is limited and often completely absent, in particular for poor households. We explain this basic pattern in household insurance in an infinite horizon model in which households have access to complete markets subject to collateral constraints resulting in a trade-off between the financing needs for consumption and durable goods purchases and risk management concerns. We show that household risk management is monotone in household net worth and income, under quite general conditions, in economies with income risk, durable goods, and durable goods price risk. The limited participation in markets for claims which allow household risk management is a result of the financing risk management trade-off and should not be considered a puzzle.

The Urgency of Now: Foundations’ Role in Ending Racial Inequity

Keywords: Racialized poverty, racial inequity, adaptive systems, targeted universalism, collective impact, structural racialization, good jobs, financial capability, opportunity mappingThe challenge [of eliminating poverty] is greater than it has been in generations.... One in every eight Americans now lives in poverty, a rate that has nearly doubled since 1980. - President Barack ObamaThe Growing American ChallengeFor centuries, people of color in the United States have endured disproportionate poverty and been excluded f rom economic opportunities. They have been labeled minorities, as though their fewer numbers somehow made their suffering acceptable. Yet people of color will become the majority in America by 2050 (Center for American Progress & PolicyLink, 2013). One of the major challenges of our time is how America will reconcile the fact that the emerging majority still endures oppressive poverty.How will we handle this crucial shift in demographics? What investments will we make in people, systems, and communities? Answers to these questions will determine if America will continue to maintain its quality of life and its competitive position in the world.Fifty years after the March on Washington for Jobs and Freedom, people of color are doing worse - and often much worse by every measure, - compared to whites. Examples of these racial differences in economic outcomes are stark and abundant. According to a 2013 Urban Institute study, whites possessed six times more value in financial assets than Af rican Americans and Hispanics. The median household net worth for whites in 2010 was $110,729, in comparison to $4,995 for Af rican American and $7,424 for Hispanic households (McKernan, Ratcliffe, Steuerle, & Zhang, 2013).According to the U.S. Department of Labor (2012), communities of color faced significantly higher unemployment rates than whites, whose jobless rate is 7.4 percent, in comparison to 13.6 percent for Af rican Americans and 11 percent for Hispanics.According to the American Community Survey (2013), f rom 2007 to 2011, 43 million Americans, or 14 percent of the nation, were living below the poverty level of $11,500 in annual income for an individual or $23,000 for a family of four. Yet the distribution of poverty has been unequal. Up through 2011, the poverty rates were:* 27 percent for Native Americans and Alaska Natives,* 26 percent for Af rican Americans,* 23 percent for Latinos/Hispanics,* 18 percent for Native Hawaiians and other Pacific Islanders,* 15 percent for Vietnamese and Korean Americans, and* 12 percent for whites.A recent Institute on Assets and Social Policy study found that institutional and policy practices have been driving the widening racial-wealth gap between white and minority households (Shapiro, Meschede, & Osoro, 2013). These practices create inequitable opportunities in areas such as homeownership, income, unemployment, college education, and family financial support. This study also revealed that historic racial practices of neighborhood segregation, workplace discrimination, lack of access to credit, and educational inequity account for much more of the wealth and income gap than cultural or social factors.Poverty and race continue to be intimately intertwined. In fact, it is impossible to address poverty without dealing directly or indirectly with the issue of race. The profound racial demographic shift this nation is undergoing requires a response that is both universal in its goals and targeted in its strategies (powell, 2012).As Martin Luther King, Jr. so prophetically pointed out, must learn to live together as brothers or we will all perish together as fools. We are tied together in a single garment of destiny, caught in an inescapable network of mutuality. King offers us a poignant reminder that if we cannot figure out how to address racial inequities as the minorities are becoming the majority, then the quality of life for almost everyone will be diminished. …

Wealth data quality in the National Income Dynamics Study Wave 2

This paper examines the quality of data on household assets, liabilities and net worth in the South African National Income Dynamics Study (NIDS) Wave 2. The NIDS is the first nationally representative survey on household wealth in South Africa. The cross-sectionally weighted data are found to be fit for use in terms of the univariate distributions of net worth, assets and liabilities, but population totals are probably underestimated due to the presence of missing wealth data in Phase 2 of Wave 2 that is not taken into account in the weights. When compared with national accounts estimates of household net worth, there is an apparent inversion of the estimated totals of financial assets versus non-financial assets. Further research is required into why this is so. We find that the NIDS wealth module is a suitable instrument for the analysis of household wealth.

Wealth data quality in the National Income Dynamics Study Wave 2

This paper examines the quality of data on household assets, liabilities and net worth in the South African National Income Dynamics Study (NIDS) Wave 2. The NIDS is the first nationally representative survey on household wealth in South Africa. The cross-sectionally weighted data are found to be fit for use in terms of the univariate distributions of net worth, assets and liabilities, but population totals are probably underestimated due to the presence of missing wealth data in Phase 2 of Wave 2 that is not taken into account in the weights. When compared with national accounts estimates of household net worth, there is an apparent inversion of the estimated totals of financial assets versus non-financial assets. Further research is required into why this is so. We find that the NIDS wealth module is a suitable instrument for the analysis of household wealth.

Analysis of Wealth Using Micro and Macro Data: A Comparison of the Survey of Consumer Finances and Flow of Funds Accounts

Researchers use different types of household balance sheet data to study different aspects of lifecycle saving and wealth accumulation behavior. Macro data from the Flow of Funds Accounts (FFA) are produced at a quarterly frequency and are available in a timely manner, but they can only be used to study the behavior of the household sector as a whole. Micro data from the Survey of Consumer Finances (SCF) are available every three years and only with a lag, but they can be used to address questions that involve differences in behavior over time and across various types of households. Despite the very different approaches to estimating household net worth, the two data sets show the same general patterns wealth changes over the past twenty-five years. Areas where the FFA and SCF diverge in aggregate levels—in categories such as owner-occupied housing, noncorporate equity, and credit cards—may be explained by methodological decisions applied in the production of the data. Those differences do not fundamentally alter one's perception of household wealth dynamics in the period leading up to and following the Great Recession.

Responsibilised Resilience? Reworking Neoliberal Social Policy Texts

Responsibilised Resilience? Reworking Neoliberal Social Policy Texts

Tough Choices in Tough Times

Debt is a ubiquitous component of households' financial portfolios. Yet we have scant understanding of how household debt constrains spending on needed health care. Diverse types of debt have different financial properties and recent work has shown that they may have varying implications for spending on needed health care. In this article, we explore the associations between indebtedness and medication nonadherence. First, we consider overall debt levels and then we disaggregate debt into types. We use a population-based sample of 434 residents of southeast Michigan who had been prescribed medications, collected in 2009-2010, the wake of the Great Recession. We find no association between medication nonadherence and total indebtedness. However, when we assess each type of debt separately, we find that having medical or credit card debt is positively associated with medication nonadherence, even net of household income, net worth, and other characteristics. Furthermore, patients with greater amounts of medical or credit card debt are more likely to be nonadherent than those with less. Our results suggest that credit card debt and medical debt may have serious implications for the relative affordability of prescription medications. These associations have been overlooked in past research and deserve further examination.

Rental Real Estate Ownership Prior to the Great Recession

The purpose of this study was twofold: To provide an updated profile of rental real estate investors and to investigate household characteristics associated with investment in rental real estate prior to the Great Recession. Based on the Life Cycle Hypothesis of Savings, analyses were conducted using data from the 2004 panel of the Survey of Income and Program Participation. Multivariate results indicated that household net worth was the most significant correlate of rental real estate ownership. Controlling for demographic and economic factors, Black householders were more likely to own rental property than White householders, and householders aged 55–64 years were more likely to own rental property than householders aged 25–34 years Homeowners and those who were housing‐cost burdened on their primary homes were more likely to own rental property. The result showing that housing‐cost burdened homeowners were more likely to own rental real estate compared with those who were not housing‐cost burdened raises questions about overreliance on real estate as an investment prior to the Great Recession.

Debt and Foregone Medical Care

Most American households carry debt, yet we have little understanding of how debt influences health behavior, especially health care seeking. We examined associations between foregone medical care and debt using a population-based sample of 914 southeastern Michigan residents surveyed in the wake of the late-2000s recession. Overall debt and ratios of debt to income and debt to assets were positively associated with foregoing medical or dental care in the past 12 months, even after adjusting for the poorer socioeconomic and health characteristics of those foregoing care and for respondents' household incomes and net worth. These overall associations were driven largely by credit card and medical debt, while housing debt and automobile and student loans were not associated with foregoing care. These results suggest that debt is an understudied aspect of health stratification.

Household assets, school enrollment, and parental aspirations for children's education in rural China: Does gender matter?

Using rural household data from the China Household Income Project (CHIP) 2002, this article provides an analysis of different effects of household assets independent of family income on children's school enrollment and parental aspirations for education, examining both outcomes by children's gender. The study first compared the responsiveness of boys' and girls' enrollment with the improvement of household assets, measured as liquid assets and net worth, relative to family income. The multivariate regression analysis further detected the effects of household assets on both boys' and girls' school enrollment and parental aspirations for their future education. Statistical results show that, compared with family income, household assets matter more for girls' schooling than for boys'. In addition, household net worth was found to be significantly associated with parental aspirations for children's education regardless of gender. This study, albeit exploratory, sheds light on child welfare and education policies in rural China.

Ways to Richness: Determination of Household Wealth in 16 Countries

The study examines determination of wealth among older households from a cross-national comparative perspective. Data obtained from 16 national samples reveal that in all countries household wealth is accumulated through two major mechanisms: labor market income and inter-generational transfers. Higher income and reception of inheritance are likely to increase household net worth. Despite considerable cross-country variation in the distribution of wealth, the effects of income and inheritance on net worth are found to be uniform across societies. Further analysis does not detect any systematic association between household net worth and country-level characteristics or social and taxation policies. Nor does it detect any systematic association between country structural attributes and the ways that wealth is determined and accumulated. The findings are discussed in light of previous research and theory on the topic.

Is Student Debt Jeopardizing the Short-Term Financial Health of U.S. Households?

In this study, the authors use the Survey of Consumer Finances to determine whether student loans are associated with household net worth. They find that median 2009 net worth ($117,700) for households with no outstanding student loan debt is nearly three times higher than for households with outstanding student loan debt ($42,800). Further, multivariate statistics indicate that households with outstanding student loan debt and a median 2007 net worth of $128,828 incur a loss of about 54 percent of net worth in 2009 compared with households with similar net worth levels but no student loan debt over the same period. The main policy implication of this study is that outstanding student debt may jeopardize the short-run financial health of households. However, this topic is complex and more research is needed before suggesting policy prescriptions.

Analysis of Wealth using Micro and Macro Data: A Comparison of the Survey of Consumer Finances and Flow of Funds Accounts

Researchers use different types of household balance sheet data to study different aspects of lifecycle saving and wealth accumulation behavior. Macro data from the Flow of Funds Accounts (FFA) are produced at a quarterly frequency and are available in a timely manner, but they can only be used to study the behavior of the household sector as a whole. Micro data from the Survey of Consumer Finances (SCF) are available every three years and only with a lag, but they can be used to address questions that involve differences in behavior over time and across various types of households. Despite the very different approaches to estimating household net worth, the two data sets show the same general patterns wealth changes over the past twenty-five years. Areas where the FFA and SCF diverge in aggregate levels—in categories such as owner-occupied housing, noncorporate equity, and credit cards—may be explained by methodological decisions applied in the production of the data. Those differences do not fundamentally alter one&amp;amp;#x27;s perception of household wealth dynamics in the period leading up to and following the Great Recession.

Challenging Corporate Domination: The Public Ownership Approach

Copyright © 2013 The Pennsylvania State University, University Park, PA In the wake of the most crippling economic downturn since the Great Depression, it is becoming increasingly evident that the United States is facing a myriad of serious problems that can no longer be solved by a stalemated political system.1 These challenges will inevitably require the conceptualization of a vision for comprehensive systemic change, and a major component of this is the question of what to do about the large private corporations that presently, to varying degrees, imperil our economy, threaten our democracy, and impede progress on environmental issues. The ability of large corporations—especially in the financial arena—to endanger the entire economic system is no longer in any doubt. According to the U.S. Treasury Department and Congressional Budget Office (CBO), the financial crisis and Great Recession has cost the nation at least $2.6 trillion in lost gross domestic product (GDP), $19.2 trillion in lost household net worth, and 8.8 million jobs.2 The $19.2 trillion number is worth contemplating for a moment. As there are around 115 million households in the United States, the total loss of wealth from the Great Recession is approximately $167,000 per household.3 Policy actions taken during the Great Recession by both the Bush and the Obama administrations—as well as similar actions taken throughout our history and by nations abroad—demonstrate that the sheer size of some of these corporations vis-a-vis the economy requires a government backstop. This reality ensures that profits are often private, but all the risks public. Challenging Corporate Domination: The Public Ownership Approach

Are Japanese Households Financially Healthy, and If so, Why? A Group of Seven (G7) Comparison

In this paper, I conduct an international comparison of the financial health of households using data on household wealth and indebtedness for the Group of Seven (G7) countries and show that, even though household borrowings in Japan were the highest among the G7 countries, at least until 2000, household assets were also high in Japan, as a result of which household net worth and financial health in Japan were among the highest in the G7 countries. Turning to long-term trends in Japan over time, I find that Japan has shown a sharp increase over time in household borrowing, at least until 2000, and a sharp increase over time in both household assets and household net worth, at least until 1990. It is not clear whether the greater financial health of Japanese households is due more to culture or to government policies, institutions, and other non-cultural factors, but it appears that long-term trends over time in household assets, liabilities, and net worth in Japan can be explained much better by non-cultural factors than by culture.