Wealth inequality in the euro area Results of the Household Finance and Consumption Surveys 2010 and 2014 Aurel Schubert 23 June 2017 The views expressed are those of the speaker and not necessarily those of the ECB
Overview 1 2 3 4 5 6 The Household Finance and Consumption Survey (HFCS) Motivation of the HFCS Results from the HFCS 2010-2014: net wealth Changes in wealth inequality: indicators and distribution Composition of assets and elasticity of Gini coefficient Debt burden and financial vulnerability of households 2
The Household Finance and Consumption Survey (HFCS) Survey on household balance sheet and more (assets, liabilities, income, consumption) in the euro area Ex-ante output harmonised and general guidelines, but some differences in implementation across countries First wave carried out in 2009-2010, second wave in 2013-2014, covering 18 euro area countries + Hungary and Poland 85,000 households interviewed in wave 2 3
Motivation of the HFCS Need to learn about finances of European households Help gain a better understanding of the transmission mechanism of monetary policy and Allow studying the impact of shocks on financial stability Benefits of micro data (HFCS) Distributions of wealth/debt across (groups of) households Sub-population developments may cancel out / hide behind macro aggregates Heterogeneity important for monetary policy transmission and financial stability Analyse the impact of shocks, policies and institutional changes on HH sub-groups of particular policy interest: Lowest/highest income/wealth deciles Over-indebted Credit-constrained, etc. 4
Results from the HFCS: Decline in household net wealth Household net wealth declined in all parts of the distribution from 2010 to 2014 in the euro area Largest decline in the bottom wealth quintile Growth of net wealth in the euro area, %, HICP-inflation adjusted Note: All comparisons done between two different cross-sections, the composition of households within the same groups is different in 2010 and 2014 Source: HFCS 5
percentage change in the indicator Rubric Household Finance and Consumption Survey Results from the HFCS: wealth inequality Modest increase in wealth inequality 2010-2014 in the euro area Euro area results hide heterogeneity across countries and inequality measures 25% euro area 2010 2014 Gini Theil (GE(1)) Atkinson (ε = 1) Top 5% share Top 10% share 0.680 0.685 (0.006) (0.005) 0.931 0.942 (0.037) (0.032) 0.708 0.713 (0.006) (0.005) 37.2 37.8 (1.2) (1.9) 50.5 51.2 (1.0) (0.9) relative change 0.8% 1.1% 0.7% 1.4% 1.3% 15% 5% -5% Gini Theil Atkinson(1) -15% -25% euro area BE DE GR ES FR* IT CY LU MT NL AT PT SK FI Source: HFCS 6
Change in wealth Rubric Household Finance and Consumption Survey Household wealth changed differently along the distribution Belgium Wealth increased in the lower part of the distribution and decreased at the top Decrease in inequality for most indicators Germany Wealth decreased in the lower part of the distribution Increase in inequality for indicators more sensitive to lower parts of the distribution (Gini, Atkinson) Cyprus Wealth decreased in the entire distribution Mixed results on inequality 7 Change in the distribution of net wealth Percentile of net wealth Source: HFCS. How to read this chart: the 80 th percentile of net wealth decreased by over 50% in Cyprus, decreased by around 5% in Belgium, and increased by around 5% in Germany. Comparisons are done on the distribution, not on specific households.
Composition of household assets by decile, 2014 Household Main Residence (HMR) most significant asset, dominant for the middle class Portfolios generally not very diversified, except for the richest deciles Wealth structure across the distribution similar in 2010 and 2014 A ceteris paribus increase in house prices affects disproportionately the middle class and tends to reduce Gini of net wealth Source: HFCS, wave 1 Source: HFCS, wave 2 Composition of total assets 8
Vulnerability / debt burden by income quintile Debt burden and vulnerability of households important from monetary policy and financial stability points of view Debt-to-income and debt-to-asset ratio measure medium and long term debt burden Between 2010 and 2014, slight increase in medium and long term vulnerability Particularly for low income households 12% 10% 8% 6% 4% 2% 0% I Lowest II-IV V Highest I Lowest II-IV V Highest Debt-to-income ratio > 300% Debt-to-asset ratio > 100% 2010 2014 9
Vulnerability / debt burden by income quintile Debt-service-toincome ratio measures short term debt burden 12% 10% -0.3% Debt service to income ratio 2010 2014 Debt burden in the short term declined, mainly due to low interest rates 8% 6% -0.7% Particularly for high income households 4% -1.0% 2% 0% I Lowest II-IV V Highest Source: HFCS 10
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