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Comparing wealth distribution across rich
countries: First results from the
Luxembourg Wealth Study
Eva Sierminska
Luxembourg Wealth Study
Andrea Brandolini
Banca d’Italia, Economic Research Department
and Luxembourg Wealth Study
Timothy M. Smeeding
Syracuse University and Luxembourg Wealth Study
The Luxembourg Wealth Study:
Enhancing Comparative Research on Household Finance
Banca d’Italia, Roma, 5-7 July 2007
Outline
LIS and LWS
Goals and History
Countries and
datasets
Issues in database
construction
Preliminary results
Lessons from LWS
LWS GOALS
WHERE DO WE STAND?
1.
Built up within the Luxembourg Income Study (LIS) –
www.lisproject.org following the same model.
2.
Establish a network of experts of micro-data on household net
worth to share accumulated knowledge and best practices
3.
Construct a comparable database containing wealth variables
based on existing datasets to enable cross-country
comparisons on household net worth, portfolio composition
and wealth distribution (including liquid assets, debts and
other holdings)
4.
Produce guidelines for data producers – similar to what has
been done for income distribution statistics through LIS with
the final Report of the Canberra Group
LWS HISTORY (1)

August 2002 – 27th IARIW Conference, Stockholm
– Wealth inequality trends-wealth comparability lagging income comparability
July 2003 – LIS headquarters, Luxembourg
– Meeting of experts on wealth and data collection decided LWS worthwhile
project
October 2003 – Levy Economics Institute, New York
– Further meeting of experts, update of project funding, decision to hire
coordinator
March 2004 – LIS headquarters, Luxembourg
– Official launch of LWS

January 2005 – Bank of Italy, Perugia
– Workshop on methodological issues
 July 2005 – LIS headquarters, Luxembourg
– Biennial meeting of LIS asbl: LWS fully integrated in LIS activities after
completion of first stage of the project
LIS HISTORY (2)
 June 2006 – LWS database, Beta Version
– Release to project participants
 August 2006 – 29th IARIW Conference, Joensuu, Finland
– Presentation of LWS data and methodology
 14-15 December 2006 – LIS headquarters, Luxembourg
– Workshop to discuss first comparative paper plus country
papers comparing Beta version with original national sources
in order to prepare final documentation
5-7 July 2007 – Final conference –Rome, Italy
– Presentation of the LWS project, papers on methodological
issues and substantive issues
2007 – LWS database, Alpha version
– Release to all LIS users
LIS and LWS
LWS Builds on LIS as a microdata
harmonization and research project
LIS (Luxembourg Income Study)
23 Years; 31 countries; 160 datasets
website: www.lisproject.org
LWS (Luxembourg Wealth Study)
3 Years; 10 countries; 12 datasets
website: www.lisproject.org/lws.htm
LWS COUNTRIES AND DATASETS
Austria
Survey of Household Financial Wealth
2004
Canada
Survey of Financial Security
1999
Cyprus
Survey of Consumer Finances
1999-2002
Finland
Household Wealth Survey
1994-1998
Germany
Socio-Economic Panel Study
Italy
Survey of Household Income and Wealth
1995-1998-2002
Norway
Income and Wealth Survey
1997-1999-2002
Sweden
Wealth Survey
1997-1999-2002
United Kingdom British Household Panel Study
United States
Panel Study of Income Dynamics
Survey of Consumer Finances
 Varied group of participants
2002
2000
1999-2001
1998-2001
Underlined dataset are
included in Beta version
ISSUES IN LWS CONSTRUCTION
Surveys differ
Purpose: some designed to collect wealth data (CA, IT, US-SCF),
some supplemented with special modules (GE, UK, US-PSID)
Source: mostly sample surveys, but supplemented with
administrative data in Nordic countries
Sampling frame: some over-sample the rich
Unit of analysis: generally household, but individual in GE and
UK, family in US and CA
Number of wealth items: from 7 in UK to 30+ in IT, NW, US-SCF
 Perfect comparability cannot be achieved
 Define basic wealth concept
IDEAL LWS VARIABLE STRUCTURE
Demographics
Income and consumption aggregates
Wealth variables -(household-individual-family level)
• Non-financial assets
• Financial Assets
• Liabilities
Behavioral variables
•
•
•
•
•
•
•
Bequest motivation
Inheritance expectations
Motives for savings
Intervivos transfers
Risk attitude
Income and health uncertainty/risk
Expectations (fertility; income support from the state)
LWS Wealth Variables (1)
FINANCIAL ASSETS
Deposit Accounts: Transaction, Savings and CDs
DA
Total Bonds: Savings and Other Bonds
TB
Stocks
ST
Mutual Funds and other investment funds
TM
Life insurance
LI
Other investment./ financial assets(non-pen)
Pension Assets
OFA
PA
LWS Wealth Variables (3)
NON-FINANCIAL ASSETS
Principal residence
PR
Investment real estate
IR
Business Equity
BE
Vehicles
VH
Durables/Collectibles
Other non-financial assets
DR/CL
ONF
LWS Wealth Variables (5)
LIABILITIES
TD
Total Liabilities
Total Home secured debt
Principal residence mortgage
HSD
MG
Other property mortgage
OMG
Other home secured debt
(including line of credit)
OHSD
Vehicle loans
VL
Total Installment debt
(inc. credit card bal)
IL
Educational loans
EL
Other loans from financial institutions
OL
Informal debt
ID
Wealth Summary Variables
Risky assets :
Total assets:
Home secured debt:
Non-housing debt:
RA =TB+ST+TM
TA=sum of all assets
HSD=MG+OMG+OHSD
NHD=TD-HSD
Total financial assets:
TFA1=DA+ST+TB+TM
Total non-financial assets: TNF1=PR+IR
TNF2=PR+IR+BA
Total debt:
TD=HSD+VL+IL+EL+OL+ID
Net worth:
NW1=TFA1+TNF1-TD
NW2=TFA1+TNF2-TD
NW = (sum of all assets)-(sum of all debts)
Other Wealth Variables
Miscellaneous net worth:
Inheritance received:
Year of inheritance:
Remaining inheritance:
OWL
INH1-INH3
YRINH1-YRINH3
INH4
Tenure:
Type of dwelling:
Own business:
OWN
DWELL
BUS
Special variables:
IRnet, Vhnet, Flags
Revision since LWS Technical Conference:
– Imputations for Germany (SOEP)
– Working on inclusion of behavioral variables in LWS
– Minor data reclassification
– Exploring possibility of including pensions in Sweden
- Addition of variables to reflect national wealth
concepts
Preliminary Results
Some preliminary results for a subset of countries participating
in the project
Proportion of missing values in major components of net worth.
Canada Cyprus
Finland
Germany
Italy
Norway
Sweden
United
United
United States
Kingdom
States
SCF
Net worth
-
61
-
-
Total Financial Assets
-
21
-
-
Total Non-Financial Assets -
25
-
-
Total Debt
-
43
-
-
15,933
895
3,893
sample size
63,460
0
PSID
-
-
14
-
-
-
9
-
-
-
2
-
2
-
-
-
7
-
3
8,011
22,870
17,954
0
4,867
22,210
5
-
7,406
The cost of cross-national comparability:
reconciling LWS and national concepts
(averages in thousands of national currencies)
Variable
Canada
Finland
Italy
Sweden
United
States
1999
1998
2002
2002
2001
102.5
69.3
154.2
537.8
213.1
83.0
0.6
–
–
74.4
2.5
1.6
0.3
24.5
13.1
+ business equity
26.9
–
23.5
80.0 (1)
74.7
+ other non-fin. assets
28.5
6.5
24.4
17.8
20.6
LWS net worth
+ pension assets
+ other financial assets
LWS adjusted net worth
243.4
78.0 (2)
202.4
660.1
395.9
National source net worth
249.3
79.8
204.4
660.0
395.5
Source: LWS database, β-version and country sources. Household weights are used. (1)
Business assets. (2) It does not include other debts.
Per capita household net worth:
LWS and national balance sheets
160,000
LWS database
National balance sheets
140,000
Euros
120,000
100,000
80,000
60,000
40,000
20,000
0
Canada
Cyprus
Finland Germany
Italy
Norway
Sweden
United
Kingdom
Source: LWS database, β-version and national sources.
United
States
PSID
United
States
SCF
250,000
250,000
200,000
200,000
150,000
150,000
Means
and
medians
100,000
100,000
(2002 PPP dollars)
50,000
50,000
0
0
US (PSID)
US (SCF)
Canada
UK
Germany
0
Sweden
0
US (PSID)
10,000
US (SCF)
10,000
UK
20,000
Canada
20,000
Germany
30,000
Sweden
30,000
Italy
40,000
Finland
40,000
Finland
Median income
Italy
Mean income
Source:
LWS database,
β-version
Italy
UK
Finland
US (SCF)
US (PSID)
Canada
Germany
Sweden
US (SCF)
US (PSID)
Italy
Median net worth
UK
Germany
Canada
Finland
Sweden
Mean net worth
Household asset participation (per cent)
Wealth components AustriaCanada Cyprus
Finland Germany (1)
Italy
Norway Sweden United
United United
Kingdom States P States S
2004
1999
2002
1998
2002
2002
2002
2002
2000
2001
2001
Non-financial assets
Principal residence
Investment real estate
56
-
64
60
16
76
74
17
68
64
27
43
39
13
72
69
22
72
64
30
57
53
14
70
69
8
65
64
70
68
17
Financial assets
Deposit accounts
Bonds
Stocks
Mutual Funds
99
99
11
16
11
90
88
14
11
14
86
78
44
40
1
92
91
3
33
3
50
-
81
81
14
10
13
99
99
22
38
79
59
16
36
58
80
76
-
83
82
30
-
91
91
19
21
18
Debt
Home secured debt
39
28
68
41
65
-
52
28
30
22
10
80
-
70
-
59
39
68
-
75
46
Sample size and age composition of head of household in LWS surveys
Canada
1999
Average unit size
Mean age
Age composition (%)
24 or less
25-34
35-44
45-54
55-64
65-74
75 and over
Total
Cyprus
2002
Finland
Germany
Italy
Norway
Sweden
1998
2002
2002
2002
2002
United
Kingdom
2000
US PSID
US SCF
2001
2001
2.43
47
3.35
49
2.16
49
2.14
52
2.65
55
2.14
49
1.96
51
2.35
53
2.38
48
2.43
49
5.9
19.6
24.7
19.6
11.9
10.4
7.9
100.0
1.0
21.3
24.7
16.9
15.4
15.0
5.7
100.0
7.3
16.7
20.0
21.0
13.8
11.7
9.5
100.0
3.7
15.2
20.6
17.5
16.5
14.9
11.6
100.0
0.7
9.4
21.5
18.8
16.9
18.2
14.5
100.0
7.2
19.3
19.4
18.0
14.1
9.8
12.2
100.0
6.6
16.9
17.7
17.5
16.6
10.9
13.8
100.0
3.8
14.3
19.3
17.4
14.9
14.0
16.3
100.0
5.3
18.6
22.2
22.4
12.5
10.9
8.1
100.0
5.6
17.1
22.3
20.6
13.3
10.7
10.4
100.0
Fraction of holders, by age of the household’s heads
(per cent)
Debt-holders
Home-owners
100
100
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
24 25-34 35-44 45-54 55-64 65-75 75
and
and
over
less
Canada 1999
Sweden 2002
24 25-34 35-44 45-54 55-64 65-75 75
and
and
over
less
Finland 1998
United States 2001
Italy 2002
Source: LWS database, β-version and national sources.
Household portfolio composition (percentage share of total assets)
Wealth components
Canada
Finland
Germany
Italy
Sweden
UK
US P
US S
1999
1998
2002
2002
2002
2000
2001
2001
78
84
87
85
72
83
67
62
Principal residence
64
64
65
68
61
74
52
45
Real estates
13
20
22
17
11
9
14
17
22
16
13
15
28
17
33
38
Deposit accounts
9
10
n.a.
8
11
9
10
10
Bonds
1
0
n.a.
3
2
n.a.
n.a.
4
Stocks
7
6
n.a.
1
6
n.a.
23
15
Mutual funds
5
1
n.a.
3
9
n.a.
n.a.
9
Total assets
100
100
100
100
100
100
100
100
Total debt
26
16
23
4
35
21
22
21
22
11
19
2
n.a.
18
n.a.
18
74
84
77
96
65
79
78
79
Non-financial assets
Financial assets
of which: Home
secured
Total net worth
Distribution of household net worth (per cent)
Statistics
Canada
Finland
Germany
Italy
Sweden
UK
US P
US S
1999
1998
2002
2002
2002
2000
2001
2001
Net worth (>0)
77
83
63
89
68
82
77
77
Net worth (=0)
3
2
28
7
5
6
8
4
Net worth (<0)
20
15
88
3
27
11
16
19
10th
-17
-6
0
0
-84
0
-11
-15
25th
0
1
0
8
-1
2
0
0
75th
350
218
1000
209
447
238
378
368
90th
708
390
2000
359
972
482
925
980
Top 10%
53
45
55
42
58
45
64
71
Top 5%
37
31
38
29
41
30
49
58
Top 1%
15
13
16
11
18
10
25
33
Gini index
75
68
80
61
89
66
81
84
Quantile/median
Wealth share
250,000
250,000
200,000
200,000
150,000
150,000
Means
and
medians
100,000
100,000
(2002 PPP dollars)
50,000
50,000
0
0
250,000
450,000
400,000
200,000
350,000
300,000
150,000
250,000
200,000
100,000
150,000
100,000
50,000
50,000
0
Italy
UK
Finland
Source:
LWS database,
β-version
Median net worth
Jantti & Sierminska (2007)
Mean net worth
Jantti & Sierminska (2007)
500,000
US (SCF)
US (PSID)
Canada
Germany
Sweden
US (SCF)
Italy
Median net worth
US (PSID)
UK
Germany
Canada
Finland
Sweden
Mean net worth
-
Comparing results with secondary data
Inequality
Rankings
Jantti &
Sierminska
S&B&S
Sweden
US SCF
US SCF
US PSID
US PSID
Canada
Germany
Italy
Canada
Germany
Finland
Finland
UK
Sweden
Italy
µ - p50
GINI
LESSONS FROM LWS PROJECT
A great deal can be learned from comparative analysis:
cross-nationally comparable data on household finance is
a priority
Many differences across countries: taking stock of what is
available paves the way to a much needed process of ex
ante standardisation
Perfect comparability not achievable – BUT large space for
improvement
Need for a flexible approach: comparability across
countries may mean to adapt to country specificities rather
than imposing too stringent common frame
With caution, it is possible to perform many useful
comparisons using the existing data
LWS GOALS
WHERE DO WE STAND?
1.
Built up within the Luxembourg Income Study (LIS) –
www.lisproject.org following the same model.
2.
Establish a network of experts of micro-data on household net
worth to share accumulated knowledge and best practices
3.
Construct a comparable database containing wealth variables
based on existing datasets to enable cross-country
comparisons on household net worth, portfolio composition
and wealth distribution (including liquid assets, debts and
other holdings)
4.
Produce guidelines for data producers – similar to what has
been done for income distribution statistics through LIS with
the final Report of the Canberra Group
MANY THANKS FOR YOUR
ATTENTION