PRESS CONFERENCE ON WORLD DISTRIBUTION OF HOUSEHOLD WEALTH

 

The richest 2 per cent of the world’s adults owned more than half of global household wealth, while the bottom half owned barely 1 per cent, New York University economics professor Edwin Wolff said at a Headquarters press conference this afternoon.

Briefing on The World Distribution of Household Wealth, a study by the United Nations University’s World Institute for Development Economic Research (UNU-WIDER) launched today, Mr. Wolff said the project was the first of its kind on the distribution of household wealth across the globe.  It was co-authored by Anthony Shorrocks, Director of UNU-WIDER; Susanna Sandström, Research Associate, and James Davies, Professor and RBC Financial Group Fellow at the University of Western Ontario’s Department of Economics.

Giving a detailed description of the methods used for data-gathering, Mr. Wolff defined household wealth as the sum of real property and financial assets, minus debts.  The data had been gathered only over the year 2000 and wealth levels were based on monetary exchange rates, rather than purchasing power parity.  The average wealth per adult was $20,500.

Noting the big variations across the world, he said average wealth in the United States stood at $144,000, while Japan had the highest figure at $181,000 and India had $1,100 in per capita assets.  One-third of total adult wealth was owned in North America; one-third in Europe; 24 per cent in the rich Asian and Pacific countries (such as Japan, Singapore and the Republic of Korea), and 1 per cent in African countries.  The richest 1 per cent of the world population lived in North America.  As for asset composition, real property was prevalent in poorer countries, where there was greater dependence on agriculture for income, while financial assets were important in the more developed countries, where financial markets were more sophisticated.

Mr. Davies added that the richest 10 per cent of adults accounted for 85 per cent of global household wealth, while assets of $2,200 per adult placed a household in the top half of world wealth distribution in the year 2000.  Assets of $61,000 placed one in the richest 10 per cent range and $500,000 in the richest 1 per cent range; a group comprising 37 million people worldwide.  There had been more than 13.5 million millionaires in 2000 and 499 billionaires.  Based on exchange rates, the six countries with the wealthiest people were Japan, Switzerland, Luxemburg, United States, United Kingdom and the Netherlands.

Answering a correspondent’s question, Mr. Davies said that, for statistical reasons, the study had included Taiwan and Hong Kong in data collected from the rich Asian and Pacific countries rather than that from mainland China.

Asked about changes in wealth distribution over time, both Mr. Wolff and Mr. Davies said changes had not been taken into account, as the study reflected data from 2000.  However, per capita income growth in member countries of the Organisation for Economic Cooperation and Development would have a widening effect on the wealth gap, while the enormous growth in China and India would tend to narrow the gap.  The lower stock prices in the United States at the beginning of the century would also have a narrowing effect.  The pricing of housing was also a factor in wealth distribution.

When asked what had motivated the study, its authors said studies in income inequality were not enough, while wealth had a great impact on household well-being and success.  Housing, for instance, was not reflected in income data.  While there were studies on national household wealth, the authors had wished to provide a more complete picture of inequality across the world.  One of the study’s conclusions was that wealth was more unequally distributed across the world than income.  It was to be hoped that the study would generate more interest in the issue of inequality across the world and that more and better data would become available for future studies.

Mr. Davies said the study had chosen international comparisons based on exchange rates, rather than on purchase power parity, because that was more appropriate in the upper ranges of capital mobility.  If capital stayed in one place, purchasing power parity -- based on the comparative value of goods -- would have been more appropriate.  As wealth, though, was concentrated in the upper tier of the population, which moved capital around the world, the authors had opted for exchange rate comparisons.

The study only included wealth owned by households, Mr. Wolff said in answer to a question as to whether the value of natural resources, for instance in Africa, had been calculated.  A World Bank study on national wealth, including natural resources, had found that oil was often owned by the State rather than by oil companies.  On the other hand, corporate assets were expressed in shares, which were mainly held by households.  Corporate debt was held by households in the form of corporate bonds.

He went on to say that the inclusion of informally held property depended on individual countries.  India had very good data on informal property, while other countries did not.  Data from the “underground” or “black” economy (such as off-shore accounts) were not included, as that was a worldwide problem and would have little effect on the outcome.  Moreover, where underground income changed into wealth, it often became visible.  Studies had shown that the underground economy had not grown over time.

Asked what had most surprised the authors, Mr. Wolff said it was the fact that world wealth was even more concentrated than income and that the inequality in worldwide wealth was even greater than in the case of national wealth.  Mr. Davies said he was surprised by the low level of indebtedness in Indonesia, China and India.  Mr. Wolff remarked that that was a consequence of the underdevelopment of financial markets.  Household debt was high in the United States because of the country’s sophisticated credit market.

Mr. Davies answered a question on Japan by saying the distribution of wealth there was relatively equal.  Over time, Japan had also had an equal standard of education and a strong encouragement of saving.  The population also had access to financial institutions.

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