wealth and inheritance in britain from 1896 to the present
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Wealth and inheritance in Britain from 1896 to the present. A B Atkinson Nuffield College, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, and London School of Economics. Plan. The recent rise in UK personal wealth - PowerPoint PPT PresentationTRANSCRIPT
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Wealth and inheritance in Britain from 1896 to the present
A B AtkinsonNuffield College,
Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, and
London School of Economics
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Plan
1. The recent rise in UK personal wealth
2. Inheritance in the UK: sources and methods
3. A return of inheritance in Britain?
4. Comparison with France
5. Conclusions.
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1. The recent rise in UK personal wealth
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Role of housing
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National wealth/income
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Public and corporate sectors
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2. Inheritance in UK: Sources and methods
Data from 1896 to 2008 (only 13 missing years)
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Need adjustments
• Non-filers;
• Exempt (settled) property and under- and over- valuation;
• Gifts inter vivos not subject to duty.
NB Not all adjustments made in estimating total wealth apply.
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Gifts inter vivos
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3. Return of inheritance in UK?
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2 U-shapes
U U
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In relation to total personal wealth
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Accounting equation
Basic accounting equation used by Piketty: ratio of transmitted wealth, B, to national income, Y, is equal in year t to
Bt/Yt = mt μt* Wt/Yt
where mt is the mortality rate, μt* is the ratio of the average wealth of decedents (corrected for gifts inter vivos) relative to the average wealth of the living, and Wt denotes total personal wealth, or Bt/Wt = mt μt*
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Mortality and μ
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Decompositioon
Piketty on France: “the historical decline in the mortality mt seems to have been (partially) compensated by an increase in the μt* ratio. Consequently, the product of the two, that is the inheritance-wealth ratio bwt = mtμt*, declined much less than the mortality rate”.
In the UK, from 1977 to 2006, the rise in the B/Y ratio by a factor of 1.69 can be seen as the product of 0.75 (mortality decline) 1.23 (rise in μ*) and 1.83 (rise in W/Y). In the earlier upturn, from 1921 to 1932, by a factor of 1.54 can be seen as the product of 1.06 (slight mortality increase) 1.03 (virtually constant μ*) and 1.41 (rise in W/Y).
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4. Comparison with France
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France
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Comparison
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Decomposition change 1977 to 2006
France UKRise in B/Y 2.39 1.69made up fromChange in mortality
0.79 0.75
Change in mu 1.75 1.23Change in B/Y 1.74 1.83
Note: Each cell shows the ratio of the 2006 value to that in 1977, so that B/Y in France in 2006 was 2.39 times the value in 1977.
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Conclusions
• Estate data for UK not go so far back in time, although more frequent in recent years;
• Knowledge about gifts inter vivos much less satisfactory in UK; and adjustments approximate;
• Have seen recent rise in B/Y but less than in France (unless increase in gifts under-stated);
• Rise in UK mostly driven by rise in W/Y;• Also U-shape in first third of C20;• Need to interpret recent U-shape in light of
changing net worth of public and corporate sectors.
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More urgency for reforming wealth transfer tax