Working Paper Series no. 497: Wealth and Income in the Euro Area: Heterogeneity in Households’ Behaviours?

Abstract

This article aims at linking the household wealth and income distributions for 15 European countries using the Household Finance and Consumption Survey. We study the role played by the household’s location in the income distributions in determining its location in the wealth distribution. A generalized ordered probit model is estimated to explain the role played by the position in the income distribution and by intergenerational transfers on the probability to be in a given wealth decile in each country. As expected, we obtain that a rise in income distribution or having received gifts and inheritances increases the probability to be in higher wealth deciles. Most importantly, we find evidences of heterogeneity in accumulation behaviours along the wealth distribution in France, Finland, Germany, Greece, Italy, Slovakia and Spain. The effect of income or inheritance on wealth accumulation varies, depending on the rank of the households in the wealth distribution. We also highlight some specificity in the top of the wealth distribution.

Luc Arrondel, Muriel Roger, and Frédérique Savignac
July 2014

Classification JEL : D31, C35

Keywords : wealth and income distributions, inheritances, accumulation behaviours, cross-country comparisons, generalized ordered probit model