Share Of Wealth Research Articles

The Political Economy of Rent-Seeking Behavior and the Connection with Unearned Income and Inequality

For decades, inequality has been one of the most important problems to be tackled, and studies of income (or wealth) inequality are the source of much research. When we deal with the sources of unequal income distribution, and if a factor is unproductive but only reasonable in the accumulation of wealth, it has a diverting impact on income. In this line, rent-seeking activities are a structure suitable for this content. Rent-seeking is aimed at gaining without contributing to the number of goods and services and shows the characteristic of unearned income. Earned income is paid for the labor from physical and mental activities. Unearned income does not have this feature and is a return on income due to investment in income. According to Stiglitz (2016), rent-seeking is a struggle to get a larger share of wealth. Taking larger shares is linked to declining shares and leads to inequality within society. In the context of the political economy of rent-seeking behavior, we examine various approaches. In addition, we illustrate how rent-seeking is related to unearned income and inequality.

Who gets the flow? Financial globalisation and wealth inequality

This paper studies whether the advent of financial globalisation has contributed to increasing wealth inequality in the United States, France, and the United Kingdom. I find that (i) positive changes in the benchmark measure of financial globalisation are associated with a positive change in the top 1% and 10% wealth shares and a negative change in the wealth share of the bottom 50% of the distribution. This is equivalent to an average gain of $1 trillion for the top 10% and $1.6 trillion for the top 1%, over the period of interest. (ii) Portfolio equities and financial derivatives appear to be the driving components behind the increase in wealth shares. (iii) The implied change in wealth shares is driven by the accumulation of new financial wealth (flow) rather than the valuation of existing one. (iv) The dynamic is strengthened when a banking crisis hits the economy, possibly because people at the top of the distribution can recover their lost wealth faster than people at the bottom. The main finding is robust to an expanded country sample, albeit reducing the historical context beyond the scope of this paper.

Wealth inequality, income inequality, and subjective well-being: A cross-country study

Abstract There are conflicting theories about whether individuals like or dislike inequality, or in other words, whether living in an unequal country increases or decreases their subjective well-being. Empirical literature has so far focused on income inequality and has not yet reached a consensus. In the present paper, we focus on wealth inequality, an aspect that has so far been overlooked in the happiness literature. The aim of the present paper is to systematically investigate the wealth inequality–happiness relationship and compare the results to the income inequality–happiness association. Furthermore, we focus on different parts of income or wealth distribution, rather than using a single inequality measure. We use data from the integrated World Values Surveys and European Values Surveys for over 50 countries, matched with the World Inequality Database data over the years 1981–2020. Following our analyses, we find some evidence supporting the “tunnel effect” theory: individuals are happier with increases in the top 10% and top 1% shares of wealth and less happy with increases in the middle 40% share of wealth, especially in low- and middle-income countries. In high-income countries, increasing the bottom 50% share of wealth increases individuals’ life satisfaction, suggesting that they favor redistribution.

Financial Advice and Household Financial Portfolios*

We explore the demand for financial advice and the role of such advice in shaping household financial portfolios. Since taking financial advice may not be randomly allocated among households, understanding the drivers behind receiving financial advice is important before exploring the role of financial advice in shaping the composition of household portfolios. A number of specification tests are undertaken, including exploring the sensitivity of the results to selection as well matching estimation techniques. The analysis reveals that financial advice is inversely (positively) associated with the share of wealth held in real estate (bonds and stocks).

Monetary policy and wealth inequality

AbstractThis thesis examines how monetary policy shocks affect wealth inequality in Australia. I analyse how a monetary policy shock, through asset price responses, affects household balance sheets and wealth inequality measures. I find that contractionary monetary policy reduces the wealth gap, but also disproportionately increases the wealth share of the most affluent Australians. This is driven largely by the response of house prices to an increase in the central bank's policy rate. I use a novel methodology to overcome the data limitations that usually impede studies of wealth inequality, and I produce results with implications for central bankers and policymakers. My results are robust to numerous lag specifications, modelling techniques and identification strategies.

Effectiveness of wealth-based vs exchange-based tax systems in reducing inequality

In the so-called “fair” models of peer-to-peer wealth exchanges, economic inequality tends to reach its maximum value asymptotically. This global trend is evident as the richest continuously accumulate a larger share of wealth at the expense of others. To address the mounting issue of inequality, different strategies of taxes and redistribution are commonly employed. Our study delves into the interplay between wealth and trade (consumption) tax bases, probing their impact on wealth distribution within wealth-conservative economies. The ultimate aim is to unearth an optimal framework that adeptly curbs inequality. Through a meticulous analysis of varying tax rates and the allocation of the collected tax to the most economically vulnerable strata, we unveil a compelling pattern resembling two distinct phases. These phases delineate the most effective systems for inequality mitigation. Our findings underscore the synergistic potential of amalgamating these tax systems, surpassing the individual efficacy of each. This synthesis beckons policymakers to weave together tax rates and precision-targeted redistribution, crafting tax systems that wield the potential for tangible and substantial reductions in economic disparity.

The unheard echoes of equality: perceptions of wealth inequality in the Czech Republic

AbstractThis study examines various attitudes to wealth inequality in Czechia and the broader CEE region and provides valuable insights into global research on inequality perceptions. By focusing on this, to date, underexplored region, our research contributes to the current understanding of wealth inequality at the global scale. The findings revealed remarkable similarities between Czech and US respondents in terms of their perceptions and preferences. On average, participants estimated that the top 20% of the population in the Czech Republic holds approximately 48% of total wealth, while expressing a preference for a lower wealth share of around 34% in the ideal scenario. These results are in alignment with previous research that highlighted a prevalent lack of awareness of actual levels of wealth inequality combined with a consistent preference for the reduction of inequality levels. By elucidating these patterns, this study contributes to the growing body of literature in the field.

Wealth Inequality in the South: Multi‐Source Evidence from Uruguay

While wealth accumulation and its distribution are arguably two of the key drivers of overall economic inequality, as well as being of major importance in their own right, very little is known about them in the developing world. I contribute to filling this gap by providing a micro–macro consistent series of aggregate wealth and its distribution in Uruguay. The country's balance sheet, which is not estimated by official institutions, is constructed for the first time by combining a wide array of data sources, leading to a book‐value wealth‐to‐income ratio of 450–500 percent. Private wealth distribution is then estimated based on the capitalization method, taking stock of combined survey‐tax‐national accounts micro‐data, resulting in a top 1 percent wealth share of 37–40 percent. Estimates are systematically compared with results based on the estate multiplier method, real estate wealth tax, household wealth survey, and Forbes billionaires list.

The Concentration of Personal Wealth in Italy 1995–2016

Abstract We estimate the distribution of wealth in Italy between 1995 and 2016 using a novel source of inheritance tax files, combined with surveys and national accounts. We find that the level of wealth concentration is in line with other European countries; however, its time trend appears more in line with the US, showing a significant increase over the period studied. The country exhibits one of the greatest declines in the wealth share of the bottom 50%. The paper also shows that age plays a marginal role in explaining wealth concentration. Changes in savings, instead, are the predominant force behind the increase in wealth inequality, even at the top. Equity prices also account for a large share of wealth growth above the 99th percentile, whereas changes in house prices play only a minor role. Finally, we document the growing concentration of life-time wealth transfers, and their increasingly favorable tax treatment.

How Deep are the Roots of Swedish Egalitarianism? A multidimensional approach

When did Sweden become equal? This question has far-reaching implications for our understanding of Swedish history, as well as for theories about inequality, institutions, and politics more broadly. In this article, we present the first multidimensional comparative analysis of the development of inequality in Sweden. Unlike most other studies, we combine a variety of measures to provide a more comprehensive view of inequality. Our findings reveal that, although the share of income and wealth accruing to the absolute top was very high at the beginning of the 20th century, Sweden was more equal than many other countries when focusing on the lower parts of the income distribution. Additionally, several indicators suggest that the decline in inequality began in the decades before the turn of the 19th century. These results imply that the development of the Swedish welfare state was both a cause and a consequence of decreasing inequality. We emphasize the importance of widespread access to education as a key factor in shaping distributional outcomes.

Developing Knowledge of Autism in Majority World Countries: Examples of Bolivia and Paraguay.

Bolivia and Paraguay are Majority World countries, which are defined as areas within which most of the world's population live, natural resources and landmass are located, but are often economically poor. Minority world countries, such as, the United States, have a smaller percentage of the world's population, but often a greater share of the world's wealth. Many Majority World countries, such as Bolivia and Paraguay, have not collected prevalence data on autism and assessments and interventions for persons are quite limited, if they are available at all. Persons with autism in Bolivia and Paraguay are at most underserved and the majority are unserved. This article reviews topological, demographic, and economic/political factors affecting the identification and provisions of services for autistic children and the current health and educational status for autistic persons in Bolivia and Paraguay. Descriptions of the efforts of outside consultants to assist parents and professional within those countries to gain information and develop assessment and intervention programs for autistic children are described. Attention is given to methodologies employed by United States consultants to ensure the implementation of culturally responsive practices. Consultants employed skilled dialogue when interviewing parents and professionals in Bolivia and Paraguay to understand their perspectives so as to guide content of trainings. The PRECEDE-PROCEED framework was employed to develop a culturally-responsive approach to assessment and intervention.

Monetary policy and the persistent aggregate effects of wealth redistribution

Monetary easing redistributes from savers, some of whom are retired and not adjusting labor supply, to borrowers who reduce their labor supply. This results in persistently lower aggregate labor and output. Hence the interaction of labor supply heterogeneity with heterogeneity in net nominal positions of households creates a monetary policy trade-off whereby short-term economic stimulus is followed by lower output over the medium term. The policy trade-off is stronger in economies with more nominal household debt and a larger wealth share of retired households but weakened by a more aggressive monetary policy stance and under price-level targeting.

Immigrants and natives’ financial decision making: Evidence from Türkiye

This study investigates the causal effects of Syrian migrants on the financial behavior of natives in Türkiye. Utilizing a comprehensive administrative data set, we employ a two-stage least square (2SLS) estimation technique that isolates causal effects by exploiting substantial exogenous variation in the share of migrants relative to natives, arising from the geographical proximity to Syrian governorates of a specific province. Results indicate that immigrants have no significant overall effects on the financial decisions of natives. We find no conclusive evidence that migrant influx promotes overall stock market participation at both extensive and intensive margins. Moreover, our investigation reveals a minimal variation in direct stock ownership or the wealth invested in stocks. We observe neither economically nor statistically significant effects on the share of natives holding bonds or funds. Additionally, no discernible impact of migrants on the wealth per capita invested in bonds, funds, and the overall stock market emerges. However, we find limited evidence suggesting that migrants contribute to an increase in the share of wealth invested in stocks, albeit with a corresponding decrease in the share of wealth allocated to funds. Lastly, we explore the heterogeneity in the effects of immigrants by gender, but our findings reveal no significant variation by gender.

Is it a boy or a girl? Newborn gender and household portfolio decisions

AbstractThis paper analyzes the role of newborn gender in household investment decisions. Parenting a new baby is associated with a reduction of the share of financial wealth held as cash and an increase in risky investments. The reallocation is however gender‐heterogeneous: the increase in the share of both total and financial wealth allocated to risky assets when parenting girls is reduced for households parenting boys. The effect is driven by the first child. Parents of newborn girls hold riskier portfolios because they make financial decisions influenced by their expectations on the autonomy and financial independence of newborns in adulthood.

Las cuentas distributivas: una herramienta para el seguimiento de la distribución de componentes de la riqueza y de la deuda de los hogares

Rationale This article presents annual distributions of aggregate wealth and debt components of Spanish households by income and wealth. Distributions for the period 2002 to 2020 are estimated drawing on the seven available waves of the Spanish Survey of Household Finances, while those for the latest period (2021-2022) are predictions. Takeaways •Distributional wealth and debt accounts allow us to monitor the distribution of aggregate wealth and debt among different groups of households when microeconomic data are lacking. •For the period 2020 to 2022, the model estimates that households in the bottom two quintiles of the income distribution saw their share of total housing wealth and debt for purposes other than house purchase rise, by 0.6 pp and 0.4 pp, respectively. By contrast, their share of bank deposits, shares and debt for house purchase is estimated to have fallen, by 0.2 pp, 0.1 pp and 0.3 pp, respectively. •Also for the period 2020 to 2022, the model estimates that households in the top income decile saw their share of total housing wealth and debt for purposes other than house purchase fall, by 0.5 pp and 1.1 pp, respectively, while their share of bank deposits and debt for house purchase is estimated to have risen, by 0.5 pp and 1.2 pp, respectively.

Household portfolio choice before and after a house purchase

AbstractUsing a unique administrative panel data from Denmark, this article documents the dynamic evolution of households' financial wealth, the equity market participation rate (extensive margin), and the conditional risky asset share of financial wealth (intensive margin) over a 7‐year period around a house purchase. We find that households' equity market participation rate falls during the year of house purchase. Conditional on participation, the risky asset share of financial wealth follows a V‐shape around the house purchase. It decreases and reaches the lowest point 1 year before a house purchase, but jumps up immediately after. This finding suggests that of the three channels identified in the literature that are related to the risky asset demand after a house purchase, the debt retirement channel and the diversification effect dominate the liquidity concern.

Beauty and stock market participation

This paper investigates whether beauty, an important natural endowment, affects investment decisions. Using data from the Wisconsin Longitudinal Survey (WLS), which provides a photo-based measure of facial beauty, we find that better-looking individuals are more likely to own stocks and invest a larger share of wealth in stocks. We consider a wide range of potential mediators that may drive this relationship between beauty and stock market participation. We find that income and sociability explain a large portion of the beauty effect. For both males and females, beauty has a significant positive impact on stock market participation. Using another dataset that includes the interviewer's rating of the respondent's physical attractiveness, we find similar results. Our study contributes to a better understanding of the economic returns to beauty and the source of heterogeneity in household portfolio choice.

Strategic guidelines for the development of forest industry of Ukraine in the post-war period

This research presents the peculiarities of the formation of a modern strategy for the development of forest industry in Ukraine. It was determined that the implementation of strategic management in the postwar period should be based on ensuring the balance of forest use. In order to increase the role of forest resources in the share of national wealth, it is necessary to move to such a model of forest use, which would ensure the proper profit of forest enterprises in a unified relationship, minimize the destructive impact on forest resources, and also ensure the appropriate level of environmental and economic security for the state. A comprehensive scientific assessment of the institutional aspects of economic relations in the context of the existing vector and conditions of development of the forestry industry of Ukraine, including the strategic guidelines approved by the State Forest Management Strategy until 2035, was carried out. The modern features of forest use caused by military operations in Ukraine are revealed. And the algorithm of their further development at different levels of the economic hierarchy is also substantiated. Conceptual approaches to the post-war management of forest resources of Ukraine in the conditions of climatic changes observed in recent decades, as well as in accordance with modern climate-oriented strategies in the world, approved at the summit in Glasgow in 2021, are outlined. Attention is paid to ways of counteracting the destructive impact of climate change on the forestry complex, as well as to the problematic issues of reforestation technologies, afforestation and forest care in order to adapt them to modern climate changes. It has been proven that the main task of state policy in the field of forest resource management is to ensure effective and proper protection, balanced use and formation of forest reproduction mechanisms, as well as the availability of appropriate tools. It was also noted that at the local levels, the implementation of the approved strategy for the development of forestry requires a comprehensive approach to individual areas of innovative activity in the forestry industry. It was found that the appropriate level of implementation of the set of specified measures creates favorable conditions for the effective implementation of the provisions of the approved normative legal acts regarding the use and reproduction of forests in Ukraine.

Accounting for pension wealth, the missing rich and under-coverage: A comprehensive wealth distribution for Germany

This study constructs a comprehensive wealth distribution for Germany to inform debate in Germany and internationally on the distribution of wealth including pension entitlements. We estimate the net present value of pension wealth in Germany in 2012 and 2017 using Socio-Economic Panel (SOEP) data. When including pension wealth, German households’ wealth-income ratio increases from 570% to 850% in 2017; the wealth share of the bottom 50% increases from 2% to 9%; and the wealth share of the top 1% declines from 30% to 20%.

Does a progressive wealth tax reduce top wealth inequality? Evidence from Switzerland

AbstractLike in many other countries, wealth inequality has increased in Switzerland over the last 50 years. By providing new evidence on cantonal top wealth shares for each of the 26 cantons since 1969, we show that the overall trend masks striking differences across cantons, both in levels and trends. Combining this with variation in cantonal wealth taxes, we then estimate an event study model to identify the dynamic effects of reforms to top wealth tax rates on the subsequent evolution of wealth concentration. Our results imply that a reduction in the top marginal wealth tax rate by 0.1 percentage points increases the top 1 per cent (0.1 per cent) wealth share by 0.9 (1.2) percentage points 5 years after the reform. This suggests that wealth tax cuts over the last 50 years explain roughly 18 per cent (25 per cent) of the increase in wealth concentration among the top 1 per cent (0.1 per cent).