Abstract
This paper discusses the distribution of wealth along with the phenomenal changes in wealth inequality worldwide; focusing, however, on Great Britain over the previous decade. By making use of the Wealth and Assets Survey (WAS), put together in Great Britain in waves from July 2006 to June 2014, we identify the main outcomes of the wealth distribution across time and space, i.e. the government office regions of the country. In our empirical analysis, we use house prices across the regions of Great Britain to identify their effect on the evolution of wealth inequality. Our results confirm that property wealth, and hence house prices, significantly affect inequality across the different groups of the wealth distribution. Moreover, among other findings, wealth is increasingly owned by those who can afford to buy real properties, while those who cannot, they observe their wealth decreasing sharply. Models have been tested for robustness across several specifications.
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Notes
- 1.
The way OECD measures wealth is discussed in their report Box 6.1. page 243 and in the appendix of the report from page 284 onwards (OECD 2015).
- 2.
According to ONS, it is a representative sample of the population following the sampling design process and how they have weighted the sample. There is no indication whether non-UK nationals were included: http://webarchive.nationalarchives.gov.uk/20160105235432/http://www.ons.gov.uk/ons/rel/was/wealth-in-great-britain-wave-3/2010-2012/index.html.
- 3.
“Wealth holdings can also have implications for the descendants of those who currently hold wealth: when wealth is bequeathed from one generation to the next, it gives opportunities to recipients that might not be available to those who have not received inheritances” Crawford et al. (2016, p. 2).
- 4.
“More than 100 percent of the recovery in both from 2010 to 2016 was due to a high return on wealth but this factor was offset in both cases by negative savings” (Wolff 2017, p. 2).
- 5.
“The literature focusing on the factors determining skewed thick-tailed earnings distribution tended to disregard the properties of wealth accumulation. Motivated by the empirical fact that wealth generally tends to be much more skewed than earnings, an important question for the subsequent literature has been whether a stochastic process describing the accumulation of wealth could amplify the skewness of the earnings distribution. Alternatively, could skewed wealth distributions become skewed due to factors unrelated to skewed earnings distributions?” (Benhabib and Bisin 2017).
- 6.
Atkinson and Harrison (1978) provide some information of the estate duty.
- 7.
For developed countries in particular—“Wealth is distributed less equally than labour income, total money income or consumption expenditure. While Gini coefficients in developed countries typically range between about 0.3 and 0.4 for income, they vary from about 0.5 to 0.9 for wealth. Other indicators reveal a similar picture” (Davies and Shorrocks 2000, p. 3).
- 8.
“Overall, these simulation exercises show a limited effect of wealth shocks on consumption inequality. Increases in stock prices tend however to slightly increase consumption inequality” (Arrondel et al. 2017, p. 24).
- 9.
“In a representative agent model and in the Yaari-Blanchard OLG model used in the paper, there is no pure wealth effect on consumption from a change in house prices if this represents a change in fundamental value. There is a pure wealth effect on consumption from a change in house prices if this reflects a change in the speculative bubble component of house prices ” (Buiter 2008, p. 2).
- 10.
Changes in house prices are essentially (close to) zero sum game where positive changes are good for owners but bad for renters and future generations.
- 11.
ONS (2012), The Quality of Data Sources on Household and Individual Wealth in the UK.
- 12.
- 13.
Subject to bias regarding wealth coming from the elder groups but rather unlikely to have any significant bias to the results of the younger groups (ONS 2009).
- 14.
For more information regarding the WAS questionnaires and the process of the Survey please read from the UK Data Service, https://discover.ukdataservice.ac.uk/catalogue/?sn=6709&type=Data%20catalogue.
- 15.
ONS (2015a, quotations from Chapter 1, pp. 1–2).
- 16.
ONS (2018).
- 17.
ONS (2015b).
- 18.
ONS (2018).
- 19.
ONS (2018, Fig. 24, p. 49).
- 20.
As defined in Sect. 2 property wealth includes all properties held by the household. For the vast majority this will be the same as the value of the main residence.
- 21.
Pension wealth is left out to reduce computation time and increase the accuracy of point estimates. The estimates do not change when it is included but the (bootstrapped) standard errors increase.
- 22.
ONS (2018).
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Kavarnou, D., Szumilo, N. (2018). Rich Become Richer and Poor Become Poorer: A Wealth Inequality Approach from Great Britain. In: Arestis, P., Sawyer, M. (eds) Inequality. International Papers in Political Economy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-91298-1_7
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