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2018 | OriginalPaper | Chapter

Rich Become Richer and Poor Become Poorer: A Wealth Inequality Approach from Great Britain

Authors : Dimitra Kavarnou, Nikodem Szumilo

Published in: Inequality

Publisher: Springer International Publishing

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Abstract

This paper discusses the distribution of wealth along with the phenomenal changes in wealth inequality worldwide; focusing, however, on Great Britain over the previous decade. By making use of the Wealth and Assets Survey (WAS), put together in Great Britain in waves from July 2006 to June 2014, we identify the main outcomes of the wealth distribution across time and space, i.e. the government office regions of the country. In our empirical analysis, we use house prices across the regions of Great Britain to identify their effect on the evolution of wealth inequality. Our results confirm that property wealth, and hence house prices, significantly affect inequality across the different groups of the wealth distribution. Moreover, among other findings, wealth is increasingly owned by those who can afford to buy real properties, while those who cannot, they observe their wealth decreasing sharply. Models have been tested for robustness across several specifications.

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previous chapter Gender Inequality in the Labour Market and the Great Recession

next chapter Why Has Income Inequality Been Neglected in Economics and Public Policy?

The way OECD measures wealth is discussed in their report Box 6.1. page 243 and in the appendix of the report from page 284 onwards (OECD 2015).

According to ONS, it is a representative sample of the population following the sampling design process and how they have weighted the sample. There is no indication whether non-UK nationals were included: http://webarchive.nationalarchives.gov.uk/20160105235432/http://www.ons.gov.uk/ons/rel/was/wealth-in-great-britain-wave-3/2010-2012/index.html.

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“In a representative agent model and in the Yaari-Blanchard OLG model used in the paper, there is no pure wealth effect on consumption from a change in house prices if this represents a change in fundamental value. There is a pure wealth effect on consumption from a change in house prices if this reflects a change in the speculative bubble component of house prices” (Buiter 2008, p. 2).

Changes in house prices are essentially (close to) zero sum game where positive changes are good for owners but bad for renters and future generations.

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Housing wealth and liquidity wealth questions were included in the Household Panel Surveys over the years 1995, 2000 and 2005 (Crossley and O’Dea 2010); while particular questions on Pension Wealth were also included over the years 2001 and 2005 (Emmerson and Wakefield 2009).

Subject to bias regarding wealth coming from the elder groups but rather unlikely to have any significant bias to the results of the younger groups (ONS 2009).

For more information regarding the WAS questionnaires and the process of the Survey please read from the UK Data Service, https://discover.ukdataservice.ac.uk/catalogue/?sn=6709&type=Data%20catalogue.

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As defined in Sect. 2 property wealth includes all properties held by the household. For the vast majority this will be the same as the value of the main residence.

Pension wealth is left out to reduce computation time and increase the accuracy of point estimates. The estimates do not change when it is included but the (bootstrapped) standard errors increase.

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Title: Rich Become Richer and Poor Become Poorer: A Wealth Inequality Approach from Great Britain
Authors: Dimitra Kavarnou
Nikodem Szumilo
Publisher: Springer International Publishing
Book: Inequality
Print ISBN: 978-3-319-91297-4

Electronic ISBN: 978-3-319-91298-1

Copyright Year: 2018
DOI: https://doi.org/10.1007/978-3-319-91298-1_7

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