Net wealth across the euro area - why household structure matters and how to control for it

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

Intergenerational Transfers and Wealth in the Euro-Area: The Relevance of Inheritances and Gifts in Absolute and Relative Terms

Private wealth is a crucial factor for the economic well-being of households. Key determinants of private wealth include intergenerational wealth transfers (gifts and inheritances), which are gaining importance since 1990, as research suggests. We conduct a detailed investigation of the distribution of wealth transfers in eight Euro-area countries. First, we investigate the patterns of prevalence and level of past wealth transfers in the individual countries: Who received transfers, and what is their present value in absolute terms? We find that in most countries the percentages of households with a transfer as well as the mean present value of those transfers is increasing along the distribution of net wealth. Using a series of country-specific multivariate regressions, we find that households with higher income and education levels have both a higher probability of receiving transfers and higher absolute transfer value. We then analyze the present value of transfers as a percent of current net worth. Here, in relative terms, some of the results are reversed, as the relative importance of intergenerational transfers does not increase with the level of wealth or income. Using a fractional logit regression we conclude that for higher income quintiles the share of current net worth due to past intergenerational transfers tends to be decreasing

Who's asking? Interviewer effects on unit non-response in the Household Finance and Consumption Survey

This study examines interviewer effects on household non-response in the three waves of the Household Finance and Consumption Survey (HFCS) in Austria. We exploit the rare opportunity to combine this wealth survey data, accompanied by a large set of paradata on all households including non-respondents, with two other sets of data, namely (i) an administrative dataset on income and (ii) a survey on interviewer characteristics. These characteristics include measures of the social background, income and wealth, and personality traits of the interviewers. Our multilevel benchmark model shows that the proportion of the variation in response behaviour that can be explained at the interviewer level has decreased from about one-third in the first wave of the HFCS to about 7% in the third wave. Using further specifications of our multilevel model we find that the following interviewer characteristics are positively related to household response: having a university degree, being married, being a homeowner and having a less open personality. At the same time, we find a highly significant negative relationship between survey participation and mean wage in the household's municipalit

Risky assets in Europe and the US: risk vulnerability, risk aversion and economic environment

We use cross-country microdata to analyse the risk taking of households in Europe and the US. Concerning the extensive as well as the intensive margin of risky assets, European households differ substantially from US households; but also inside Europe we document substantial differences. Furthermore, average risk aversion is strongly correlated with the share of households holding risky assets across countries. We decompose the observed differences into two parts. A part explainable by household characteristics as well as differences in risk aversion and a remainder. We employ the unexplained part resulting from our microeconometric decomposition analysis together with country-level variables on the economic environment to relate observed differences in risky asset holdings to institutional ones. We find that institutional differences such as shareholder protection are strongly correlated with the unexplainable differences with regard to holdings of risky assets

The Wealth Distribution and Redistributive Preferences: Evidence from a Randomized Survey Experiment

We analyze a large-scale randomized experiment on redistributive preferences within the Austrian part of one of the most comprehensive wealth surveys - the Eurosystem Household Finance and Consumption Survey. Austria displays a nearly perfect laboratory for such an experiment as it has very low levels of wealth taxation and no inheritance tax but at the same time a rather high level of wealth inequality. We estimate the causal effect of information of one's own rank in the wealth distribution on preference for wealth taxation. Previous literature has mostly focused on the income distribution instead of wealth. We find the average treatment effect to be very small and insignifcant. For the group however, who overestimates their own position in the wealth distribution information on their true rank has a strong positive effect, while for the group underestimating their position originally the effect turns out to be negative. Both combined show up as the null effect overall. As theory suggests, information thus has a different effect depending on prior beliefs

How Do Households Allocate Their Assets? Stylized Facts from the Eurosystem Household Finance and Consumption Survey

International audienceUsing the first wave of the Eurosystem Household Finance and Consumption Survey (HFCS), a large micro-level data set on households’ balance sheets in fifteen euro-area countries, this paper explores how households allocate their assets.We derive stylized facts on asset participation as well as the portfolio shares of asset holdings and investigate the systematic relationships between household characteristics and assetholding patterns. Real assets make up the bulk of total assets. Whereas ownership of the main residence varies strongly between countries, the value of the main residence tends to be the major asset for homeowners and represents a signif-icant part of total assets in all countries. While almost all households hold safe financial assets, a low share of households holds risky assets. The ownership rates of all asset categories generally increase with wealth (and income). The significance of inheritances for homeownership and holding of other real estate is remarkable. We tentatively link differences in asset holding patterns across countries to differences in institutions

How do households allocate their assets? Stylized facts from the eurosystem household finance and consumption survey

Using the Household Finance and Consumption Survey (HFCS), a large micro-level dataset on households' wealth in fifteen euro area countries, this paper explores how households allocate their assets. We derive stylized facts on asset participation as well as levels of asset holdings and investigate the systematic relationships between household characteristics and asset holding patterns. Real assets make up the bulk of total assets. Whereas ownership of the main residence varies strongly between countries, the value of the main residence tends to be the major asset for home-owners and is a significant part of total assets in all countries. While almost all households hold safe financial assets, a low share of households holds risky assets. The ownership rates of all asset categories generally increase with wealth (and income). The significance of inheritances for wealth accumulation is remarkable and underlines its key role in the process of persistent wealth inequality. We tentatively link differences in asset holding patterns across countries to differences in institutions, such as mortgage market institutions and house price-to-rent ratios