Net Wealth across the Euro Area - Why Household Structure Matters and How to Control for It

48 Pages Posted: 5 Apr 2014

See all articles by Pirmin Fessler

Pirmin Fessler

Oesterreichische Nationalbank (OeNB)

Peter Lindner

Oesterreichische Nationalbank (OeNB)

Esther Segalla

Oesterreichische Nationalbank (OeNB)

Date Written: March 13, 2014

Abstract

We study the link between household structure and cross country differences in the wealth distribution using a recently compiled data set for the euro area (HFCS). We estimate counterfactual distributions using non-parametric re-weighting to examine the extent to which differences in the unconditional distributions of wealth across euro area countries can be explained by differences in household structure. We find that imposing a common household structure has strong effects on both the full unconditional distributions as well as its mappings to different inequality measures. For the median 50% of the differences are explained for Austria, 15% for Germany, 25% for Italy, 14% for Spain and 38% for Malta. For others as Belgium, France, Greece, Luxembourg, Portugal, Slovenia and Slovakia household structure masks the differences to the euro area median and Finland and the Netherlands change their position from below to above the euro area median. The impact on the mean and percentile ratios is similarly strong and varies with regard to direction and level across countries and their distributions. We can confirm the finding of Bover (2010) that the effect on the Gini is somewhat less pronounced, but might mask relevant information by being a net effect of different accumulated effects along the distribution. Country rankings based on almost all of these measures are severely affected alluding to the need for cautious interpretation when dealing with such rankings. Furthermore, the explanatory power of household structure changes along the net wealth distribution. Therefore we argue for more flexible controls for household structure. We provide such a set of controls to account for household type fixed effects which are based on the number of household members as well as possible combinations of age categories and gender.

Keywords: walth distribution, household structure, survey methodology, unconditional distribution, non-parametric re-weighting, counterfactuals

JEL Classification: D30, D31

Suggested Citation

Fessler, Pirmin and Lindner, Peter and Segalla, Esther, Net Wealth across the Euro Area - Why Household Structure Matters and How to Control for It (March 13, 2014). ECB Working Paper No. 1663. Available at SSRN: https://ssrn.com/abstract=2408451

Pirmin Fessler (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Peter Lindner

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Esther Segalla

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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