S.Carret & J.Cui Development Workshop 1

THE WORLD DISTRIBUTION OF HOUSEHOLD WEALTH

Stephanie Carret&

Jinjie Cui (Eric)

Faculty of Economic ScienceUniversity of Warsaw

3rd November, 2009

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The Planning for today

1. Review of the paper: main ideas2. Analysis of illustrative graphs3. Other views on the subject4. What questions can we raise?

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Review of the paper: Dataset

Householf wealth: the value of physical and financial assets Household: families, person, inviduals, but above the age of

20 Information: household surveys, tax record, national balance

sheets OECD’s countries well covered but not low and middle-income

countries Difference offset by using available data for China, Indian and

Indonesia In total, data available for 39 countries = 61% of W.pop

=80% of global household wealth (Milanovic and small nbr of countries involved in the big changes in inequality)

Use of regression to make a data estimation for the missing countries

An UNU-WIDER utility program is used to estimate the world distribution of wealth

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Review of the paper: main ideas The authors examine a parameter linked to well-being which has

been less studied than income: household wealth Wealth distribution is more unequal than income: Gini of 0.892 for

wealth and 0.795 for income Wealth distribution is highly concentrated

Trends for the last decades, income inequality has more risen than wealth

inequality India/China European transition countries/Russia Africa, Latin America and other low-income countries

Wealth and income inequality are linked but not always, it depends on the conjuncture wealth follows assets pricing on the market Changes in exchange rates

Use of both PPP exchange rates and official exchange rates The Gini value declines when adjusting to PPP exchange reates

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Analysis of illustrative graphs (1)

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Analysis of illustrative graphs (2)

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Analysis of illustrative graphs (3)

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Analysis of graph (4)

Inverted shares of pop°/wealth between emergent or less developed countries and wealthier countries

Confirmed trend of the top 1%

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Analysis of illustrative graphs (5)

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Analysis of illustrative graphs (6)

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Analysis of illustrative graphs (7)

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Analysis of illustrative graphs (8)

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Analysis of illustrative graphs (9)

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Other views on Wealth Distribution (1)

Wealth transmission and its role on wealth concentration: Wealth Inequality and Intergenerational Links, by Mariacristina de Nardi, in Review of Economic Studies (2004). The transmission of physical and human capital from parents to children is a very important determinant of households’ wealth and earnings: savings behaviour

Impact of wealth distribution on development: Long-Run Changes in the Concentration of Wealth: An Overview of Recent Findings by H. Ohlsson, J.Roine, D.Waldenström, in Personal Wealth from a Global Perspective, 2008. They find that development has lowered wealth concentration

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Study on influence share’s of economical forces on wealth and income inequality: Distribution of income and wealth among individuals, in JE Stiglitz - Econometrica, 1969. Several assumptions about savings, inheritance policies, labor homogeneity and reproduction in the context of a neoclassical growth model and their implications on wealth and income distribution

The case of Japan: The Distribution of Income and Wealth in Japan, by Bauer, John, Mason, Andrew, in Review of income & Wealth, 1992. Income inequality is quite reduced in Japan thanks to many policies and cultural aspects. But the rapid appreciation of the stock market and land prices during the late 1980s led to greater inequality in the distribution of wealth

Other views on Wealth Distribution (2)

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What questions can we raiseDebate This paper puts an accent on the necessary

differenciation between wealth and income inequality What is the most development concerning problem to

focus on? What will be the influence of emergent (BRIC)

countries on the global wealth distribution in the coming 10 years?

When and what will be the effects of the catching up of « left behinds » on wealth distribution?

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Source:

Paper: Davies, J,B., Sandstrom, Susanna, Shorrocks, & Wollf, E,N (2008).

“The World Distribution of Household Wealth”, UNU-WIDER Discussion Paper No.2008/03.

Internet:Scholar Google

www.wikipedia.org

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Questions

?

Thank you.