A Comparative Analysis of Household Wealth Patterns in France and the United States

Abstract

We find that household wealth is distributed more unequally in the U.S. in 1983 than France in 1986. The Gini coefficient is 0.77 for the U.S. and 0.71 for France. There are also significant differences in the composition of wealth. Owner-occupied housing accounted for half of total assets in France, and only 30 percent in the U.S., while corporate stock and financial securities amounted to 19 percent in the U.S. and 8 percent in France. The debt-equity ratio was 0.13 in France and 0.20 in the U.S. The age-wealth profile in the two countries had the characteristic hump-shape predicted by the life-cycle model, but the profile was much flatter in France and peaked for families aged 50-59 in France, compared to 60-69 in the U S .

Explaining the structure of CEO incentive pay with decreasing relative risk aversion

“…Arrow (1965) shows that the wealth elasticity of investments at the risk-free rate is smaller than unity with decreasing relative risk aversion, thus generating a testable prediction. Cohn, Lewellen, Lease, and Schlarbaum (1975) and Kessler and Wolff (1991) show that the proportion of risky assets in household portfolios is strongly increasing in wealth, a finding corroborated by Levy (1994) in an experimental study, and by Siegel and Hoban (1982) and Morin and Suarez (1983) for wealthy households -although in a similar study, Blume and Friend (1975) cannot reject the hypothesis of constant relative risk aversion. In a survey of income and consumption at the household level, Ogaki and Zhang (2001) also conclude in favor of decreasing relative risk aversion.…”

“…Arrow (1965) shows that the wealth elasticity of investments at the risk-free rate is smaller than unity with DRRA. The empirical evidence points in this direction: Cohn, Lewellen, Lease, and Schlarbaum (1975) and Kessler and Wolff (1991) show that the proportion of risky assets in household portfolios is strongly increasing in wealth, a finding corroborated by Levy (1994) in an experimental study, and Siegel and Hoban (1982) for wealthy households -although in a similar study, Blume and Friend (1975) Survey of Consumer Finances, the mean (respectively median) U.S. household had a net worth of $0.56m (resp. $0.12m) in 2007.…”

Cash-in-Advance Constraint With Status and Endogenous Growth

“…However, the relationship between the endogenous growth rate and money growth changes from negative to positive when the elasticity of the CIA constraint with respect to status exceeds one. 8 This result is the main 5 The observations are summarized as follows: (i) "high income individuals use cash and cash plus checks for a smaller fraction of their total transactions than low income individuals (Avery et al (1987));" (ii) "the fraction of household wealth held in liquid assets decreases with income and wealth (Wolff (1983), Kessler and Wolff (1991), Kennickell and Starr-McCluer (1996) Suen and Yip (2005) by positing that consumption and a fraction of investment are constrained by cash. These studies assume that the instantaneous utility function is the constant-intertemporal-elasticity-of-substitution (CIES) type, and show that faster money growth depresses an endogenous growth rate when the intertemporal elasticity of substitution in finding in the present study.…”

“…Kawagishi (2013) construct the "CIA-status constraint," which reflects the observations of the existing studies (e.g., Avery et al (1987), Wolff (1983), Kessler and Wolff (1991), Kennickell and Starr-McCluer (1996)). 5 Specifically, Kaminoyama and Kawagishi (2013) assume that an agent faces a CIA constraint which binds more loosely with a rise in the agent's own status, defined as relative income.…”

Effects of inflation on wealth distribution: Do stock market participation fees and capital income taxation matter?

“…Empirically, wealth is highly concentrated and is distributed much more unequally than income. Greenwood (1983), Wolff (1987), Kessler and Wolff (1992), and Díaz-Giménez et al (1997) estimate Gini coefficients of the wealth distribution for the US economy in the range of 0.72 (single, without dependents, female household head) to 0.81 (nonworking household head). Our model is able to replicate these findings and to explain the concentration of wealth to a large extent.…”