The level and distribution of global household wealth 2000-2010

Anthony Shorrocks James Davies Rodrigo Lluberas

Some Related Literature

Goldsmith, Raymond W. (1985): Comparative National Balance Sheets, A Study of Twenty Countries, 1688-1978, University of Chicago Press. Milanovic, Branko (2005): Worlds Apart: Measuring International and Global Inequality, Princeton University Press. Davies, Sandstrom, Shorrocks and Wolff (2008): The world distribution of household wealth in J.B. Davies (ed.) Personal Wealth from a Global Perspective (Oxford University Press). World Bank (2011): The Changing Wealth of Nations. Davies, Sandstrom, Shorrocks and Wolff (2011): The level and distribution of global household wealth, Economic Journal, March.

Objective
To study the world distribution of household wealth across individuals, countries and regions wealth = real assets + financial assets debts level results for years 2000 to 2010 global distribution pattern for 2000 and 2010 compared across countries using official exchange rates comparisons for adult population

Structure of talk
Evidence on wealth levels and composition Estimating levels for countries without direct data Evidence on wealth distribution Estimating distributions for countries without wealth distribution data Adjusting top tail to match information in rich lists World distribution of wealth

Methodology details
(1) adult population (2) average wealth level: based on household balance sheets and wealth survey data (covering 58 countries, 64% of world population, 93% of world wealth) extended by regression methods to most other countries region-income class averages imputed to remaining countries (3) distribution of wealth: based on distribution data for 21 countries wealth dist estimated from income dist for most other countries region-income class averages imputed to remaining countries

Asset composition, 2010

Wealth dominated by Real Assets in low income countries Financial Assets more important in high income countries Financial Interrelations Ratio rises with development (Goldsmith, 1985). Large differences in wealth composition for countries at similar income

Composition of financial assets, 2010

Net worth per capita 100000 200000 300000

400000

Switzerland

Australia Singapore France Italy UnitedCanada States of America Kingdom United Japan Denmark New Zealand Netherlands China, Taiwan Israel

Czech Republic

0 0

50000 GDP per capita

100000

150000

FINANCIAL ASSETS

Coeffficient

Std. Err.

Log Consumption per capita GDP per capita growth Log Market cap % Urban Population Survey dummy Year 2001 Year 2002 Year 2003 Year 2004 Year 2005 Year 2006 Year 2007 Year 2008 Region 1 Region 2 Region 3 Region 4 Region 5 Region 6 Region 7 Region 8 Region 9 Region 10 Region 11 Constant

1.215733 -0.0122004 0.116785 0.0087758 -2.67626 0.01902 0.2080241 0.3547831 0.3355473 0.1626965 0.2335123 0.3680972 -0.1087921 0.0383852 3.048696 1.213987 -0.8130091 -1.310652 -0.6102694 -0.5771056 -0.0944294 -0.6550942 0.3461472 0.1642567 -2.046011

0.0860526 0.0031073 0.035741 0.0023328 0.3580639 0.0938944 0.0997578 0.1159512 0.1096835 0.1007499 0.1028249 0.1170866 0.1207646 0.1062478 0.5976494 0.6165629 0.169785 0.2205095 0.1167259 0.1890337 0.0748071 0.316613 0.5931403 0.3335446 0.7875055

"R2" Obs

0.9369 329

LIABILITIES Coefficient Log Consumption per capita Log Domestic Credit available in private sector % Urban Population Year 2001 Year 2002 Year 2003 Year 2004 Year 2005 Year 2006 Year 2007 Year 2008 Region 1 Region 2 Region 3 Region 4 Region 5 Region 6 Region 7 Region 8 Region 9 Region 10 Region 11 Constant 1.331343 0.8158173 0.0068305 -0.0236963 0.1580091 0.236093 0.2418213 0.1113806 0.1925364 0.1997734 -0.1730441 -0.4460049 -1.452746 0.4748125 -0.7917038 0.155983 -0.0519343 -0.0619697 0.1233718 -0.1506066 -0.1598387 -0.0769177 -7.47391 Std. Error 0.0773791 0.0485209 0.0020307 0.0837411 0.0831774 0.0833594 0.0842856 0.0855134 0.0875066 0.0886027 0.0981365 0.0966382 0.4421547 0.4577424 0.1610342 0.200721 0.1056128 0.172601 0.0670747 0.284193 0.4322219 0.295433 0.7032472 "R2" Obs 0.9572 329

NON FINANCIAL ASSETS Coefficient Std. Error

Log Consumption per capita Life Expectancy Log population density % Urban population Year 2001 Year 2002 Year 2003 Year 2004 Year 2005 Year 2006 Year 2007 Year 2008 Region 1b Region 2b Region 3b Region 4b Region 5b Region 6b Region 7b Region 8b Constant

1.065605 4.54589 -0.066068 0.0079423 -0.0457686 0.0400724 0.1252834 0.1048758 0.0259857 0.0802483 0.1049583 -0.1665944 -0.6122215 1.212321 1.75544 -0.5681939 -0.3928919 -0.1617774 0.8709652 0.5567338 -19.40279

0.1333333 2.136041 0.0194459 0.0042267 0.1043351 0.0999626 0.1056559 0.1062708 0.1166455 0.121354 0.1267945 0.1960449 0.0696875 0.6295298 0.9061725 0.2212142 0.2189427 0.0696185 0.6752563 0.9841658 9.64514

R2 Obs

0.9105 132

Global Wealth 2000-10

USD trillion 200 North America Latin America and Caribbean Europe 100 Africa China 50 India 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Asia-Pacific

150

Sources of changes in wealth levels 2000-2010

real economic growth and private saving inflation (consumer prices) asset price changes (e.g. housing) exchange rate movements (especially $ - euro) population shifts and ageing

Wealth shares by region 2010

Geographical spread of wealth

wealth is heavily concentrated in North America, Europe, and high income Asia-Pacific countries - collectively own nearly 85% of world wealth North America has 6% of the world adult population, 31% of household wealth Europe and high income Asia-Pacific countries also own disproportionate amounts of wealth For Africa, China, India, and lower income Asian countries, share of wealth is considerably less than population share, sometimes by a factor of more than 10

Global trends in wealth per adult

World Wealth Levels, 2010

Wealth levels across Countries

global household wealth using official exchange rates = $ 30,932 per adult in 2000 $ 43,784 per adult in 2010 average wealth per adult in 2010 = $ 373,000 in Switzerland $ 236,000 in USA $ 201,000 in Japan $ 17,000 in China $ 12,000 in Indonesia $ 4,900 in India

Wealth distribution data

Strategy for global wealth distribution

1) published wealth (and income) dist data for 21 countries 2) impute missing quantile shares using WIDER utility 3) compare wealth to income shares 4) estimate wealth dist from income dist data for 142 countries 5) generate synthetic wealth samples for each country (1 observation per 5000 adults) 6) scale up wealth values to match average wealth 7) process world wealth sample c 880,000 8) match with rich list data by region, re-estimate top tail, and repeat step 7

Pareto Top Tail

Unadjusted and adjusted wealth values for China

Wealth inequality is very high

concentration of wealth within countries is generally high share of the top 10% around 60% in China 71% in the United States higher still in other countries even higher for world as a whole richest 2% of adults own more than half global wealth global wealth Gini for adults is 0.881 - same as group of 100 where 1 gets $890 and other 99 each get $1 most global inequality is between country inequality wealth more unequally distributed than income across countries high income countries have bigger share of wealth than GDP reverse is true of middle- and low-income nations some exceptions in Nordic and Eastern Europe transition countries

The global wealth pyramid

The global rich 2010 (official exchange rates)

$ 4,118 per adult to be in top half of world wealth ranking $ 73,000 to be in richest 10% of adults $ 588,000 to be in richest 1% of adults (group with 44 million members worldwide) richest 1% of adults owned 44% of global assets richest 5% owned 70% richest 10% owned 83% bottom half owned under 2%

Regional Composition of Global Wealth Distribution, 2010

Regional membership of top decile

Most (86%) of the worlds richest individuals live in Europe (37%) North America (26%), and rich Asia-Pacific countries (23%) China dominates deciles 5-9 of the global wealth distribution India, Africa, and low-income Asian countries dominate the bottom third Latin America resembles global pattern

Owners of wealth above USD 100,000 by country

Where do the richest 10% live?

small number of countries account for most of the richest 10% of adults 23% are American; 14% are Japanese in year 2000 very few Chinese and Indians in top 10%. Many more Chinese (6%) in 2010.

Dollar millionaires by country of residence

Where do the richest 1% live?

Richest 1% even more concentrated geographically US even more dominant 33% reside in the US, 12% in Japan China and India membership was almost insignificant in year 2000, now China accounts for 3.5%

High and Ultra High Net Worth Individuals by region