The Wealth Inequality of Nations

Abstract

Comparative research on income inequality has produced several frameworks to study the institutional determinants of income stratification. In contrast, no such framework and much less empirical evidence exist to explain cross-national differences in wealth inequality. This situation is particularly lamentable as cross-national patterns of inequality in wealth diverge sharply from those in income. We seek to pave the way for new explanations of cross-national differences in wealth inequality by tracing them to the influence of different wealth components. Drawing on the literatures on financialization and housing, we argue that housing equity should be the central building block of the comparative analysis of wealth inequality. Using harmonized data on 15 countries included in the Luxembourg Wealth Study (LWS), we demonstrate a lack of association between national levels of income and wealth inequality and concentration. Using decomposition approaches, we then estimate the degree to which national levels of wealth inequality and concentration relate to cross-national differences in wealth portfolios and the distribution of specific asset components. Considering the role of housing equity, financial assets, non-housing real assets, and non-housing debt, we show that cross-national variation in wealth inequality and concentration is centrally determined by the distribution of housing equity.

Dynastic cores and the borrowed time of newcomers. Wealth accumulation and the Norwegian one percent

“…In Norway, the concentrated affluence and intergenerational reproduction of wealth at the top end of the distribution is found to be similar to that of most European countries (Hansen, 2014; see also, Pfeffer & Waitkus, 2021). Generally, financial wealth is unequally distributed to a greater extent than composite wealth that includes fixed assets, such as home ownership (Hansen, 2012).…”

“…In Scandinavian countries, there is a growing body of literature highlighting the centrality of inheritance in amassing great fortunes (Hansen & Wiborg, 2019) and the profound concentration of top wealth in those countries (Hansen, 2014; Pfeffer & Waitkus, 2021). Thus, notions of dynastic tendencies in Scandinavian countries have recently emerged (Björklund et al., 2012; Hansen, 2014; Sjögren, 2018).…”

Exit, control, and politics: The structural power of finance under asset manager capitalism

“…Politically, r is determined by government policies in areas such as labor markets, taxation and financial regulation. Whereas in the past the distribution of power between capital and labor may have sufficed to explain policy outcomes in those areas, the growth and financialization of household wealth have complicated the picture (Adkins et al, 2020;Pagliari et al, 2020;Pfeffer & Waitkus, 2021). Today, even middle-class households have a stake in the rate of return on capital, and thus "great expectations" of governments to protect their wealth (Chwieroth & Walter, 2019).…”

“…Sociologists of class and inequality have been calling for a return to the study of (wealth) elites, and in particular of the mechanisms through which these elites gain and perpetuate their wealth (Beckert, forthc. ;Savage, 2021), and recent empirical work has shed much-needed light on household wealth and its composition (Goldstein & Tian, 2020;Hansen & Toft, 2021;Pfeffer & Waitkus, 2021). However, this literature has barely broached the question of the single most important determinant of top-1% wealth -the rate of return on capital.…”

Lockdown, Earnings Losses and Household Asset Buffers in Europe1

“…17 To facilitate the interpretation of cross‐country variation in the level of buffering, we first look at the median levels of liquid assets held across countries and how this relates to both the level of earnings and total wealth. Differences across countries in the level of wealth relative to average earnings or income, and in the composition of that wealth in terms of financial versus real assets, arise for a wide range of reasons that are not particularly well‐understood, though the relevant literature has pointed to the importance of demographic profiles, social protection systems and pension levels and coverage, and the level of homeownership (see for example Mathä et al ., 2017 ; Pfeffer and Waitkus, 2021 ).…”