Fiscal Studies

Since its inception in 1979, Fiscal Studies has earned a reputation around the world for publishing high-quality, original research papers in a style understandable to a wide audience. Written by leading experts in public economics and fiscal policy worldwide, articles are presented in a clear and accessible format which appeals to a broad international readership of policy makers, public finance practitioners and academic researchers.

Production Editor: Judith Payne

Editors: James Cloyne, Claire Crawford, Eric French and Helen Miller

Contact Fiscal Studies

Household Wealth in Great Britain: Distribution, Composition and Changes 2006–12

| Journal Articles | Fiscal Studies, Volume 37, Issue 1

For many years, survey data on household wealth have been somewhat limited, but the situation is improving in the UK and internationally. This paper uses the new Wealth and Assets Survey (WAS) to document some key features of the distribution of household wealth in Great Britain. We quantify the extent of inequality in total wealth and in its broad components (financial wealth, housing wealth and pension wealth). Exploiting the fact that WAS is a longitudinal survey, we show trajectories of wealth and its components over the period 2006 to 2012 for different birth cohorts. Total wealth on average increased in real terms over this period for working-age households and fell for retirement-age households. However, wealth held outside pensions fell on average over this period for all except the youngest cohort.

Rowena Crawford , David Innes and Cormac O'Dea

The Challenge of Measuring UK Wealth Inequality in the 2000s

| Journal Articles | Fiscal Studies, Volume 37, Issue 1

This paper is an outgrowth of the larger project ‘Top Wealth Shares in the UK since 1896’ by the same authors. They thank for helpful comments Daniel Heymann, Thomas Piketty, Gabriel Zucman, the co-editor Thomas Crossley, an anonymous referee and participants at the Household Wealth Data and Public Policy Conference (Bank of England, March 2015), the 16th Trento Summer School (June 2015) and the workshop on measuring inequalities of income and wealth (Berlin, September 2015). The authors are particularly grateful to Alan Newman (Office for National Statistics, ONS), who shared the Wealth and Assets Survey (WAS)-based results submitted to the OECD Wealth Database, and to Sian-Elin Wyatt (ONS), who addressed their inquiries about the WAS response rates. This research received financial support from the Institute for New Economic Thinking (INET), the European Research Council (ERC) and the Economic and Social Research Council / Department for International Development (ESRC-DFID) joint fund (grant ES/I033114/1). The usual disclaimer applies.

Facundo Alvaredo , A. B. Atkinson and Salvatore Morelli

Changes in the Distribution of After-Tax Wealth in the US: Has Income Tax Policy Increased Wealth Inequality?

| Journal Articles | Fiscal Studies, Volume 37, Issue 1

A substantial share of the wealth of Americans is held in tax-deferred form such as in retirement accounts or as unrealised capital gains. Most data and statistics on assets and wealth are reported on a pre-tax basis, but pre-tax values include an implicit tax liability and may not provide as accurate a measure of the financial position or material well-being of families. In this paper, we describe the distribution of tax-deferred assets in the Survey of Consumer Finances (SCF) from 1989 to 2013, provide new estimates of the income tax liabilities implicit in those assets, and present new statistics on the level and distribution of after-tax net worth. The results of our analysis suggest that, relative to published statistics on pre-tax net worth, the distribution of after-tax wealth is slightly less concentrated in the early years of our sample period, but the effectiveness of the income tax system in reducing wealth inequality has decreased during the last decade. We find the reduction in the long-term capital gains rate is the primary reason for the muted effectiveness of the current income tax system in reducing wealth inequality.

Adam Looney and Kevin B. Moore

Comparing Retirement Wealth Trajectories on Both Sides of the Pond

| Journal Articles | Fiscal Studies, Volume 37, Issue 1

We use comparable data from the US and England to examine similarities and differences in the level and trajectories of assets among households aged 70 and over. We find that in the US assets on average decline gradually with age, while in England older households actually accumulate wealth. These differences appear to be driven largely, though not entirely, by housing wealth: over the period we consider, house price growth drove increases in housing wealth in England that more than offset the slow drawdown of non-housing wealth. This suggests the illiquid nature of housing is likely to be an important factor in explaining wealth drawdown at older ages. We also consider the potential importance of bequest motives and savings to insure against the risk of medical and long-term care expenses.

Richard Blundell , Rowena Crawford , Eric French and Gemma Tetlow

Heterogeneity in Economic Shocks and Household Spending in the US

| Journal Articles | Fiscal Studies, Volume 37, Issue 1

Large swings in aggregate household sector spending, especially for big-ticket items such as cars and housing, have been a dominant feature of the macroeconomic landscape in the past two decades. Income and wealth inequality increased over the same period, leading some to suggest the two phenomena are interconnected. Indeed, there is supporting evidence for the idea that heterogeneity in economic shocks and spending are connected, most notably in studies using local-area geography as the unit of analysis. The Survey of Consumer Finances (SCF) provides a household-level perspective on changes in wealth, income and spending across different types of families. The SCF confirms that inequality is indeed increasing in recent decades, and the data provide support for the proposition that shocks to income and wealth are indeed related to large swings in spending across and within birth cohorts. However, the economic shocks associated with the Great Recession and changes in spending and debt to income ratios are widespread, and inconsistent with a narrow focus on the experiences and changes in behaviour of particular (especially low- and modest-income) households.

Sebastian Devlin-Foltz and John Sabelhaus

The Bank of England / NMG Survey of Household Finances

| Journal Articles | Fiscal Studies, Volume 37, Issue 1

Every year since 2004, the Bank of England has commissioned NMG Consulting to carry out a survey on household finances. This paper describes the NMG Survey, its methodology, and its advantages and disadvantages relative to other surveys. The NMG Survey is useful in providing a timelier guide to developments in the distribution of household balance sheets than other surveys, it appears better at measuring financial distress, and it includes questions on topical policy issues that are often not available in other surveys. A drawback of the NMG Survey is that there may be a greater risk of selection into the survey based on unobservable characteristics than is the case for some other household surveys.

Gareth Anderson , Philip Bunn , Alice Pugh and Arzu Uluc

Household Wealth Data and Public Policy

| Journal Articles | Fiscal Studies, Volume 37, Issue 1

This special issue of Fiscal Studies brings together a set of papers on the collection and analysis of household-level data on wealth. Many of the papers in this issue are drawn from a conference entitled ‘Household Wealth Data and Public Policy’ held in March 2015. The conference included papers that looked at the distribution of wealth, mechanisms generating wealth inequality,saving behaviour over the life cycle, public finance issues, how wealth data can inform an understanding of macroeconomic dynamics and the challenges associated with collecting data on the distribution of wealth.

Thomas Crossley and Cormac O'Dea

Lifetime Receipt of Inheritances and the Distribution of Wealth in England

| Journal Articles | Fiscal Studies, Volume 37, Issue 1

We investigate the impact of inheritances and gifts received on the distribution of wealth. Whereas previous work has looked only at marketable wealth, we consider broader measures of wealth including state and private pensions. We find that once pension wealth is included, inheritances and gifts no longer have an equalising impact on the distribution of wealth. Without pension wealth, including wealth transfers reduces the Gini coefficient for wealth from 0.57 to 0.52. With pension wealth, the impact is negligible. We argue that this latter effect gives a better indication of the impact of inheritances on the distribution of lifetime income.

Rowena Crawford and Andrew Hood