Household Wealth in a Cross-Country Perspective

Abstract

This paper provides a comparative analysis of household wealth in the United States, the United Kingdom, Japan, France, Germany, Spain, and Italy. We start by comparing national levels and composition of financial wealth, looking at the instruments in which households invest: deposits, securities other than shares, shares and other equity, mutual funds, pension funds, and insurance products. We then discuss the empirical evidence on household indebtedness and real assets across countries, providing a summary of the situation with regard to total household wealth (i.e. net financial assets plus real assets). The analysis of aggregate wealth is accompanied by an examination of micro data on household asset participation and the distribution of household net worth. Finally, we study some correlations and run an econometric exercise on the links between household wealth and selected economic indicators, with particular focus on saving.

Andrea Generale, Grazia Marchese, Matteo Piazza, Carmelo Salleo, Gabriele Semeraro, Federico Signorini, and Richard Walton provided useful comments on previous versions. The paper is the responsibility of its authors and the opinions expressed here do not necessarily reflect those of the Bank of Italy or of the Eurosystem.

Statistical Appendix

The household sector includes non-profit institutions serving households. Gross disposable income is used to compute the ratios in Tables 4.1, 4.2, 4.10, 4.11 and 4.12. Financial and non-financial data are at current values; therefore they are neither corrected for inflation nor seasonally adjusted.

Tables 4.1, 4.2, 4.3, 4.4 4.10 4.12. For European countries, data are based on the European System of Accounts 1995 (ESA95), for Japan and the United States (US) on the United Nations’ System of National Accounts 1993 (SNA93). Stock data are those at the end of the year, annual flow data result from the sum of the transactions that occurred in the year. Data are not consolidated, i.e. they include transactions between units belonging to the household sector. The data sources are the financial accounts databases available on the national central banks’ websites in the June 2010 version. The only exception is the UK for which data have been taken from the Office for National Statistics (ONS). In the case of Japan and Germany the main sources have been supplemented with some details available respectively on the OECD and the European central bank’s statistical data warehouse.

Tables 4.2, 4.3 and 4.4. Deposits include currency in circulation. Securities other than shares include short- and long-term securities and financial derivatives (whose amount is, however, negligible). Insurance technical reserves include life and non-life insurance claims and net equity in pension fund reserves. For Italy, retirement allowances are included. “Other assets” is a miscellaneous item: ESA95 rules (paragraph 5.120) indicate that this item includes financial claims deriving from a timing difference between the moment in which the transaction takes place and the corresponding payment. Trade credits are classified in this item. In the light of their negligible amounts, loans granted by households are included in this category in France, Italy (loans to co-operatives), Spain (only for 1995), Japan and in the US.

Table 4.3 Flows are different from changes in stocks as revaluations and other changes in volume are not included. The ratio for each period (e.g. 1995–1997) has been calculated between the average amounts of the period.

Table 4.5 In this table, unlike the previous ones, deposits do not include currency. For the European countries, deposits are broken down according to ESA95 categories: transferable deposits and other deposits. Transferable deposits are those immediately convertible into currency or transferable by payment means (e.g. cheques) without any kind of significant restriction or penalty. US transferable deposits correspond to the item “Checkable deposits and currency” in the Federal Reserve’s Flow of Funds.

Table 4.6 In this table, shares and other equity include listed shares, unlisted shares, and other equity. The aggregate is not fully comparable across countries because the criteria adopted for the valuation at market prices of unlisted shares and other equity differ. For Germany, the weight of quoted shares is partially estimated using ECB data. Listed shares held by English households are taken from the ONS. For the US, listed and unlisted shares are approximated by the item “corporate directly held equities asset” and other equity by the item “Equity in non-corporate business”, both published in the Flow of Funds accounts. For Japan, listed shares correspond to the sub-item “shares” published in the Bank of Japan Flow of Funds (see the Guide to the Flow of Funds, page 66, available on the Bank of Japan website).

Table 4.7 Money market funds are not included. For continental European countries data are taken from the quarterly statistics on mutual funds transmitted by the national central banks to the European Central Bank. For the UK the source is the Investment Management Association (see the Report on Asset management in the UK 2009–2010, published in July 2010). For the US data are taken from the 2010 Fact Book of the Investment Company Institute. For Japan data from the financial accounts of Securities investment trusts have been used.

Tables 4.8 and 4.9. The main source of the data on pension funds and insurance products is the table on Households’ financial and non-financial assets and liabilities by country that the OECD has published since 2005. The OECD collects this additional information in the framework of the national annual financial accounts. Even though definitions are consistent with SNA93 and ESA95, information available has yet to be fully harmonized. The national financial accounts have been used also to estimate the data on 2009 not yet available. Italian households hold other pension plans (severance pay provision) traditionally managed internally by firms and therefore not included in Table 4.8 but reckoned in total household financial assets (Table 4.1)

Table 4.10 Net financial wealth is computed as the difference between total financial assets and financial debt. The latter, differently from total financial liabilities in the financial accounts, basically include only loans and exclude trade debts and other liabilities.

Tables 4.11 and 4.12. Dwellings for Spain, total real assets for all the other countries. For Spain, the UK and the US data updated to 2009 have been taken respectively from the Banco de Espana, the ONS and the Federal Reserve. For Japan the data source is the Cabinet Office. For Italy data are taken from the Bank of Italy’s Supplement to the Statistical Bulletin “Household wealth in Italy – 2009”. For France and Germany data are taken from the tables on household assets available on the OECD website. The data for 2009 for France, Germany, Italy and Japan have been estimated using statistics on the price dynamics in the housing markets. Net worth in Table 4.12 is computed as the sum of net financial wealth (Table 4.10) and non-financial wealth (Table 4.11).

Figure 4.2. Household saving rate. The household gross saving rate is the ratio of gross saving to gross disposable income for European countries and Japan. For the US the indicator is the ratio of personal saving to disposable income.