The Wealth of Families: The Intergenerational Transmission of Wealth in Britain in Comparative Perspective

Report (2020)

SGINI: Stata module to compute Generalized Gini and Concentration coefficients, Gini correlations and fractional ranks

Software (2020)

sgini is a light-weight package to calculate generalized Gini and Concentration coefficients. It also allows factor decomposition (income source). As a by-product, the companion commands sginicorr ... [more ▼]

sgini is a light-weight package to calculate generalized Gini and Concentration coefficients. It also allows factor decomposition (income source). As a by-product, the companion commands sginicorr computes (generalized) Gini correlations and fracrank generates fractional rank variables. [less ▲]

Do Children Carry the Weight of Divorce?

in Demography (2019), 56(3), 785-811

Relatively few studies have examined the physical health of children who experience parental separation. The few studies on this topic have largely focused on the United States and have used cross ... [more ▼]

Relatively few studies have examined the physical health of children who experience parental separation. The few studies on this topic have largely focused on the United States and have used cross-sectional designs. Our study investigates the relationship between parental separation and children’s body mass index (BMI) and overweight/obesity risk using the UK Millennium Cohort Study. Treating parental separation as a process, we analyze variations in children’s physical health before and after the date of their parents’ separation in order to capture potential anticipation, adaptation, delayed, or cumulative effects. We estimate fixed-effects models to account for the potential correlation between children’s physical health and unobserved factors associated with parental separation, such as socioeconomic background and other time-invariant parental characteristics. We find no evidence of statistically significant anticipation effects in the build-up to parental separation or of statistically significant changes in children’s physical health immediately after separation. However, our results show that in the longer term, the BMI of children whose parents separate significantly deviates from the BMI of children from intact families. Furthermore, this association is especially strong for separations that occur when children are under age 6. [less ▲]

Accounting for the distributional effects of the 2007-2008 crisis and the Economic Adjustment Program in Portugal

E-print/Working paper (2019)

This paper develops a new method to model the household disposable income distribution and decompose changes in this distribution (or functionals such as inequality measures) over time. It integrates both ... [more ▼]

This paper develops a new method to model the household disposable income distribution and decompose changes in this distribution (or functionals such as inequality measures) over time. It integrates both a micro-econometric and microsimulation approaches, combining a flexible parametric modelling of the distribution of market income with the EUROMOD microsimulation model to simulate the value of taxes and benefits. The method allows for the quantification of the contributions of four main factors to changes in the disposable income distribution between any two years: (i) labour market structure; (ii) returns; (iii) demographic composition; and (iv) tax-benefit system. We apply this new framework to the study of changes in the income distribution in Portugal between 2007 and 2013, accounting for the distributional effects of the 2007-2008 crisis and aftermath policies, in particular the Economic Adjustment Program (EAP). Results show that these effects were substantial and reflected markedly different developments over two periods: 2007-2009, when stimulus packages determined important income gains for the bottom of the distribution and a decrease in income inequality; 2010-2013, when the crisis and austerity measures took a toll on the incomes of Portuguese households, particularly those at the bottom and top of the distribution, leading to an increase in income inequality. [less ▲]

Income and Wealth Above the Median: New Measurements and Results for Europe and the United States

in Decancq, Koen; van Kerm, Philippe (Eds.) What Drives Inequality (2019)

The study of the upper tail of the income and wealth distributions is important to the understanding of economic inequality. By means of the ‘isograph’, a new tool to describe income or wealth ... [more ▼]

The study of the upper tail of the income and wealth distributions is important to the understanding of economic inequality. By means of the ‘isograph’, a new tool to describe income or wealth distributions, the authors compare wealth and income and wealth-to-income ratios in 16 European countries and the United States using data for years 2013/2014 from the Eurozone Household Finance and Consumption Survey and the US Survey on Consumer Finance. Focussing on the top half of the distribution, the authors find that for households in the top income quintile, wealth-to-income ratios generally increase rapidly with income; the association between high wealth and high incomes is highest among the highest percentiles. There is generally a positive relationship between median wealth in the country and the wealth of the top 1%. However, the United States is an outlier where the median wealth is relatively low but the wealth of the top 1% is extremely high. [less ▲]

Foreign Workers and the Wage Distribution: What Does the Influence Function Reveal?

in Econometrics (2018), 6(3),

This paper draws upon influence function regression methods to determine where foreign workers stand in the distribution of private sector wages in Luxembourg, and assess whether and how much their wages ... [more ▼]

This paper draws upon influence function regression methods to determine where foreign workers stand in the distribution of private sector wages in Luxembourg, and assess whether and how much their wages contribute to wage inequality. This is quantified by measuring the effect that a marginal increase in the proportion of foreign workers—foreign residents or cross-border workers—would have on selected quantiles and measures of inequality. Analysis of the 2006 Structure of Earnings Survey reveals that foreign workers have generally lower wages than natives and therefore tend to haul the overall wage distribution downwards. Yet, their influence on wage inequality reveals small and negative. All impacts are further muted when accounting for human capital and, especially, job characteristics. Not observing any large positive inequality contribution on the Luxembourg labour market is a striking result given the sheer size of the foreign workforce and its polarization at both ends of the skill distribution. [less ▲]

Increasing Inequality in Joint Income and Wealth Distributions in the United States, 1995 to 2013

in Conference Online Programme & Papers (2018, May)

The study of joint income and wealth distributions is important to the understanding of economic inequality. However, these are extremely skewed variables that present tails containing strategic ... [more ▼]

The study of joint income and wealth distributions is important to the understanding of economic inequality. However, these are extremely skewed variables that present tails containing strategic information that usual methods – such as percentile grouping – cannot easily underline. In this paper, we propose a new method that is able to provide a thorough examination of tails: the isograph and the logitrank. These tools entail a more detailed conception of inequality by describing inequality at different points of the distribution. Using US data 1995-2013 from the Luxembourg Wealth Study (LWS), we find first that income inequality increased significantly, in particular in the upper middle classes. Second, the wealth- to-income ratio measuring the importance of wealth relative to income, increased significantly. The association between high wealth and high incomes, fourth, increased as well. Based on our analysis, we can conclude that this increase in the association between wealth and income is not a trivial consequence of increasing inequality, but a stronger coherence of the diagonal at the top of the income and wealth distributions. [less ▲]

Macroprudential policy and household wealth inequality

in Journal of International Money and Finance (2018), 85(C), 262-277

Macroprudential policies, such as caps on loan-to-value (LTV) ratios, have become part of the policy paradigm in emerging markets and advanced countries alike. Given that housing is the most important ... [more ▼]

Macroprudential policies, such as caps on loan-to-value (LTV) ratios, have become part of the policy paradigm in emerging markets and advanced countries alike. Given that housing is the most important asset in household portfolios, relaxing or tightening access to mortgages may affect the distribution of household wealth in the country. In a stylised model we show that the final level of wealth inequality depends on the size of the LTV ratio, housing prices, credit cost and the strength of a bequest motive, and therefore it is not possible to predict an unequivocal effect of LTV ratios on wealth inequality. These trade-offs are illustrated with estimations of `Gini Recentered Influence Function' regressions on household survey data from 12 Euro-zone countries that participated in the first wave of the Household Finance and Consumption Survey. The results show that, among the households with active mortgages, high LTV ratios at the time of acquisition are related to high contributions to wealth inequality today, while house price increases are negatively related to inequality contributions. A proxy for the strength of bequest motives tends to be negatively related with wealth inequality, but credit cost does not show a significant link to the distribution of wealth. [less ▲]

Accounting for Differences in Income Inequality across Countries: Ireland and the United Kingdom

E-print/Working paper (2018)

This paper proposes a framework for studying international differences in the distribution of household income. Integrating micro-econometric and micro-simulation approaches in a decomposition analysis it ... [more ▼]

This paper proposes a framework for studying international differences in the distribution of household income. Integrating micro-econometric and micro-simulation approaches in a decomposition analysis it quantifies the role of tax-benefit systems, employment and occupational structures, labour prices and market returns, and demographic composition in accounting for differences in income inequality across countries. Building upon EUROMOD (the European tax-benefit calculator) and its harmonized datasets, the model is portable and can be implemented for any cross-country comparisons within the EU. An application to the UK and Ireland--two countries that have much in common while displaying different levels of inequality--shows that differences in tax-benefit rules between the two countries account for roughly half of the observed difference in disposable household income inequality. Demographic differences play negligible roles. The Irish tax-benefit system is more redistributive than UK's due to a higher tax progressivity and higher average transfer rates. These are largely attributable to policy parameter differences, but also to differences in pre-tax, pre-transfer income distributions. [less ▲]

Measuring and accounting for the deprivation gap of Portuguese immigrants in Luxembourg

in Review of Income and Wealth (2017), 63(2), 288-309

This paper examines the relative well-being of Portuguese immigrants in Luxembourg by looking at indicators of material deprivation. We document material deprivation differences between immigrants and ... [more ▼]

This paper examines the relative well-being of Portuguese immigrants in Luxembourg by looking at indicators of material deprivation. We document material deprivation differences between immigrants and nationals---the `deprivation gap'---and measure the extent to which income differentials (and other sociodemographic differences) explain this gap using a combination of non-parametric methods and a versatile graphical device. We find a large and significant deprivation gap against Portuguese immigrants, whatever the indicator considered. The extent to which the gap is merely a reflection of differences in income, however, depends on what deprivation items are taken into consideration. Income differences almost fully account for material deprivation differences when the latter is measured using the items included in the official EU social indicator of material deprivation. Inclusion of housing condition indicators mitigates this relationship and we then find compelling evidence that the deprivation gap is not entirely accounted for by income differentials. [less ▲]