Increase In Net Wealth Research Articles

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This study examines the determinants of housing tenure choice decisions of Millennials.
 Using KLIPS panel data from 2014 to 2020, a correlated random effects probit model and a fixed effects logit model were estimated to control for endogeneity problem associated with time-invariant unobserved heterogeneity. Estimation results showed that net wealth, relative housing cost, marital status of household heads were major determinants of housing tenure choice decisions. Permanent income, one of key variables on the housing tenure choice, was not significant, indicating that net wealth rather than income is more important to homeownership decisions of Millennials. However, the effect of net wealth on the probability of home owning was estimated to decrease over the observation period because the increase in net wealth could not catch up with the rise of housing price. A sharp decrease of the effect of net wealth on the probability of home owning in recent years was attributable to a dramatic increase in housing price and more stringent mortgage regulations.

Mandatory pension savings and long-run debt accumulation: evidence from Danish low-wage earners

AbstractBased on two decades of Danish register data at the individual level, this paper finds that a 1-dollar increase in pension wealth leads to a 42-cent rise in total debt for a group of low-wage earners. Collective bargaining in the labor market provides time-sector variation in mandatory pension contribution rates, which we exploit in two empirical research designs; an event study and a cross-sectional instrumental variable regression model. Both methods demonstrate that the debt rise is accompanied by increased housing wealth and homeownership rates. Together, the empirical evidence indicates that mandatory pension contributions lead to a significant increase in net wealth, as well as in gross debt.

Mandatory Pension Savings and Long-run Debt Accumulation: Evidence from Danish Register Data

This paper uses two decades of Danish register data at the individual level to show that a 1-dollar increase in pension wealth leads to a 42-cent rise in total debt for a group of low-wage earners. Collective bargaining in the labor market provides time-sector variation in mandatory pension contribution rates, which we exploit in two empirical research designs; an event study and a cross sectional IV-regression model. Both methods demonstrate that the debt rise is accompanied by increased housing wealth and homeownership rates. Together, the empirical evidence indicates that mandatory pension contributions lead to a signi cant increase in net wealth, as well as in gross debt.

The changing distribution of wealth in the pre-crisis US and UK: the role of socio-economic factors

The USA and the UK experienced substantial increases in net wealth in the decade that preceded the financial crisis, largely driven by house-price booms in each country. The distribution of these gains across households led to a slight increase in wealth inequality in the USA but a substantial fall in inequality in the UK. We use a decomposition technique to examine the extent to which changes in households' socioeconomic characteristics explain changes in wealth holdings and wealth inequality. In both countries we find that changes in household characteristics had an equalizing effect on wealth inequality, moderating the increase in the USA and accounting for over one-third of the fall in UK wealth inequality.

Measuring the 'Real' Cost of Children: A Net Wealth Approach

Estimates of the cost of raising children in Australia are typically based on the additional expenditure incurred by parents compared to non-parents, and generate estimates in the vicinity of $10,000 per year per child, and much more if child-care costs are included. This paper questions the basis upon which children are considered to be a 'cost'. The fact that people switch expenditure from other goods and services to child-related goods and services does not mean that their utility declines. Based on a utility maximising framework, an alternative and intuitively appealing method of estimating the cost of children is proposed: if children are a 'cost' then couples who have children should end up with lower net wealth than comparable couples without children or with fewer children. Data from the Household, Income and labour Dynamics in Australia survey, which included special wealth modules in 2002 and 2006, are used to model married couples' wealth in 2002 and change in wealth between 2002 and 2006 conditional upon the number children living with them. Even though this 'net wealth' approach accounts for lower labour force participation and earnings of those with children (notably mothers), which is ignored in the expenditure based methods, the estimates suggest that children 'cost' at most $1,300 per annum, and may even lead to an increase in net wealth. The estimates do have significant social policy implications, but apply only to married couples and are not applicable for setting guidelines for maintenance payments in the case of separated parents.

Deficits and the Demand for Money

In recent years, the large budget deficits of the Federal Government have renewed interest in the effects of government debt on private sector behavior. To date, empirical research has focused on the relationship between debt and two key variables, consumption and interest rates.' By contrast, empirical research on the effects of government debt on other variables of interest to macroeconomists is limited. This paper examines the relationship between government debt and one such variable, real money balances. The neglect of government debt as a determinant of money demand is surprising. Many traditional macroeconomic models, such as Blinder and Solow's [9] influential work, include government debt as an argument to the money demand function. Moreover, macroeconomic theorists have long been aware that a government debt - money demand relationship has important implications for the efficacy of fiscal policy.2 This paper examines the relationship between government debt and real money holdings over the 1950-1990 period. A positive money - debt relationship was previously noted by Butkiewicz [12] and Deravi, Hegji, and Moberly [15] (hereafter referred to as DHM). Our work improves upon this research in two ways. First, in contrast to Butkiewicz [12] and DHM [15], we investigate the time-series properties (stationarity, cointegration) of relevant variables. Second, we distinguish between supply-side and demand-side explanations of the debt-money relationship. The explanation advanced by Butkiewicz [12] and DHM [15] is that an increase government debt is perceived by the private sector as an increase in net wealth and hence should increase money demand.3 This explanation ignores a potentially important connection between government debt and money supply. If the Federal Reserve monetizes debt, and if the private sector's adjustment to this monetization is lagged, then debt and real money balances will exhibit a positive correla

THE REAL-BALANCE EFFECT: ASPECTS AND EVIDENCE*

POSTKEYNESLAN MONETARY THEORY has explained the of changes in the real money supply in three basic ways. They may be termed the effect (generally called the real-balance effect), the portfolio-balance effect, and the Cambridge effect. According to the net-wealth effect, an increase in the money supply increases the assets of the private sector but not its liabilities, since fiat money is a liability of the government. As a result of this increase in wealth, private spending increases. Since government spending is assumed constant, total spending for goods and services increases as a result of the increase in the net wealth of the private sector. The result of the increase in net wealth, assuming full employment, is an equiproportional rise in the price level.' According to the portfolio effect, variations in an area's stock of money affect expenditures when real balances bear a proportion to the value of the portfolio which is different from the proportion desired by money holders. Rearrangement of portfolios takes place through additional spending or additional accumulation, processes which drive prices either up or down and restore the actual value of money holdings to the desired value. Finally, the Cambridge views individual decisions about money holdings as depending upon yearly income. If money holdings represent a fraction of yearly income that is larger (say) than people desire, they remedy the situation by increasing their rate of expenditure, causing an increase in the price level. It is our contention that the only realistic way in which to make the real-balance (RBE) a useful concept with which to analyze the workings of the economy is to define it as the set of all changes in spending behavior resulting from a change in the real stock of money and to include, as aspects of the RBE, the three effects mentioned above. Moreover, there should be a recognition of the fact that excess supply of money may imply an excess demand for financial instruments as well as for commodities. In other words, an overall view of the of changes in real balances must admit that changes in the money supply affect interest rates, investment, and incomes, as in the Keynes effect. Hence, we also include this as the indirect aspect of the RBE. In our view, an increase in the real money supply increases spending for both consumption goods and financial instruments, with the ultimate increase in spending stemming not only from whatever wealth argument enters the consumption function, but also from whatever extra income is generated through increased investment and lower interest rates.