Why Wealth Inequality Differs Between Post-Socialist Countries?

30 Pages Posted: 14 Jul 2020

See all articles by Michal Brzezinski

Michal Brzezinski

University of Warsaw, Faculty of Economic Sciences

Katarzyna Sałach

University of Wasaw, Faculty of Economic Sciences

Date Written: June 19, 2020

Abstract

We provide the first attempt to understand how differences in households’ socio-demographic and economic characteristics account for disparities in wealth inequality between five post-socialist countries of Central and Eastern Europe. We use 2013/2014 data from the second wave of the Household Finance and Consumption Survey (HFCS) and the re-weighted Oaxaca-Blinder-like decomposition based on re-centered influence function (RIF) regressions. Our results show that the differences in home-ownership rates account for up to 42% of the difference in wealth inequality measured with the Gini index and for as much as 63-109% in case of the P50/P25 percentile ratio. Differences in home-ownership rates are related to alternative designs of housing tax policies but could be also driven by other factors. We correct for the problem of the ‘missing rich’ in household surveys by calibrating the HFCS survey weights to top wealth shares adjusted using wealth data from national rich lists. Empirically, the correction procedure strengthens the importance of home-ownership rates in accounting for cross-country wealth inequality differences, which suggests that our results are not sensitive to the significant underestimation of top wealth observations in the HFCS.

Keywords: Wealth Inequality, Decomposition, Re-centered Influence Function (RIF) Regressions, Survey Weight Calibration, Household Finance and Consumption Survey (HFCS), Post-Socialist Transition, Central and Eastern Europe (CEE), Housing, Home-ownership

JEL Classification: D31, D63, P36

Suggested Citation

Brzezinski, Michal and Sałach, Katarzyna, Why Wealth Inequality Differs Between Post-Socialist Countries? (June 19, 2020). Available at SSRN: https://ssrn.com/abstract=3631191 or http://dx.doi.org/10.2139/ssrn.3631191

Michal Brzezinski (Contact Author)

University of Warsaw, Faculty of Economic Sciences ( email )

Dluga 44/50
Warsaw, - 00-241
Poland

HOME PAGE: http://https://sites.google.com/view/brzezinski/

Katarzyna Sałach

University of Wasaw, Faculty of Economic Sciences

Warsaw
Poland

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