Emerging wealth disparities after the storm: Evidence from Spain

We examine how the recession that started in December 2007 in the United States impacted wealth accumulation and inequality among Spanish households. We find that overall wealth dropped by 15 percent between 2008 and 2011, with losses concentrating among households in the mid and top wealth quintiles. The most hard hit wealth components were business assets, primary home equity, and durable assets, which declined by 40 percent, 23 percent and 19 percent, respectively. Wealth losses among all households were likely sustained by restricted access to credit. Nonetheless, in part due to their more diversified wealth portfolios, households in the top wealth quintile amassed a greater share of the country’s wealth during the recession. Consequently, wealth inequality, which receded during the expansionary years of 2002 through 2005, rose by 2008 and continued its trend in 2011.     

Expectations,education, and opportunity

Using a long panel of youths, we establish a causal link between parental expectations regarding education and educational attainment. In particular, we use an instrumental variables approach to find that the child’s chances of obtaining a high school or college degree are increasing in the parent’s expectations of the likelihood of these events. We then use differences between the objective likelihood of a child’s educational attainment and the parents’ subjective probabilities to consider the hypothesis that lower educational outcomes among certain groups are driven by a “culture of despair,” where children are low-achieving because they are expected to underachieve. While we do find that children from households with lower levels of income, wealth, and parental education are less likely to attain high school and college degrees, we reject the hypothesis that this is driven by low subjective expectations of educational success. Rather, we find that parents from disadvantaged groups have expectations for the educational outcomes of their children that differ more from the statistical likelihood of these outcomes than do parents of children from advantaged households. That is, we find that parents in more disadvantaged households are more optimistic about the educational outcomes of their children than those from more advantaged households.     

Expenditure Flows Near Widowhood

Using data from the 1980–2001 Consumer Expenditure Surveys, we investigate how impending widowhood affects households’ expenditure patterns. We find that total annual expenditures are $4,027 higher for about-to-be-widowed households compared to otherwise comparable continuously married couples. Within subcategories, expenditures average $4,108 higher for the miscellaneous subcategory which includes expenditures on funerals/burials. We conclude that differences in the needs-adjusted incomes of married and widowed households may be partly a function of pre-widowhood differences in their expenditure patterns that lead about-to-be-widowhood households to draw down on financial wealth.     

Assessing the Relationship Between Gender,Household Structure,and Net Worth in the United States

This paper examines wealth disparities by gender and household structure in the United States using data from the 1998–2013 Survey of Consumer Finances. Following studies of economic insecurity, we placed households at the center of our analysis to highlight the interconnected nature of wealth with multiple aspects of family structure. We investigated net worth by both gender and household structure, which includes variation by partnership status and the presence of other adult relatives and their roles within the household. We found that wealth disparities were largest among single adult households, but these varied by gender. Female single adult households held some of the lowest levels of net worth, but after accounting for key explanations of wealth inequality, single male households actually held greater wealth than two-adult partnered households. This relationship further depended on the presence of extended family members, where gender disparities were smaller among households with other relatives present.     

Measurement and identification of asset-poor households: a cross-national comparison of Spain and the United Kingdom

This paper is concerned with the analysis of the wealth dimension of poverty in developed countries, which cannot be measured by means of information on household income. We focus on identifying the group of households that lack enough wealth holdings to sustain them during a period of economic crisis in order to quantify asset poverty, and its demographic weight, in two industrialized countries with particularly different household demographics and saving attitudes such as Spain and the United Kingdom. Our results show that the age profile of the asset poor is remarkably similar in the two countries. In both it is individuals in households whose head is under 45 years old who are more likely to be asset poor. However, some country-specific differences also arise. For instance, the incidence of wealth poverty in the United Kingdom is about twice that of Spain. Using counterfactual analysis we find that, although the different household demographics clearly contribute importantly to this result, there remains a significant part of the asset-poverty gap which is not explained by this relevant factor.     

BLACK-WHITE WEALTH INEQUALITY: IS INHERITANCE THE REASON?

Racial differences in the receipt of financial inheritances he& to explain why the average difference in wealth between black and white households is larger than the average difference in income. Using data from a panel of prime-aged males and from a representative survey of the U.S. population, we document the greater likelihood of white households receiving an inheritance than black households. Controlling for other factors which contribute to racial differences in wealth, we estimate that financial inheritances may account for between 10% and 20% of the average difference in black-white household wealth.     

A COMPARATIVE ANALYSIS OF THE NATIVITY WEALTH GAP*

We investigate the relative wealth position of immigrant households residing in Australia, Germany, and the United States. In Germany and the United States, wealth differentials stem from differences in the educational attainment and demographic characteristics of the native and immigrant populations, rather than income differentials. In contrast, the small nativity wealth gap in Australia exists because immigrants to Australia do not translate their relative educational and demographic advantage into a wealth advantage. Overall, we find substantial disparity in the economic well‐being of immigrant and native families which is largely consistent with domestic labor markets and immigration policies. (JEL F22, D31)     

Food Calorie Intake under Grain Price Uncertainty in Rural Nepal

This study evaluated the effects of grain output price uncertainty on the farm income of rural households and, consequently, how this uncertainty influenced caloric intake through changes in farm income. Using a national rural household survey data set in Nepal, augmented with output price uncertainty measures calculated from historical time-series data, we found that grain output price uncertainty (especially for rice and wheat) tends to decrease crop production income of rural households. In addition, we found that lower crop income from production decreases calorie intake of rural households. Taken together, these results suggest that output price uncertainty during the production process tends to reduce caloric intake of rural Nepalese households. The price uncertainty seemed to reduce the crop income households need to buy calorie-rich staple foods.     

Inheritances and the distribution of wealth or whatever happened to the great inheritance boom?

Using data from the Survey of Consumer Finances (SCF), we found that on average over the period from 1989 to 2007, about one fifth of American households at a given point of time reported a wealth transfer and these accounted for quite a sizeable figure, about a quarter of their net worth. Over the lifetime, about 30 percent of households could expect to receive a wealth transfer and these would account for close to 40 % of their net worth near time of death. However, there is little evidence of an inheritance “boom.” In fact, from 1989 to 2007, the share of households reporting a wealth transfer fell by 2.5 percentage points, a time trend statistically significant at the one percent level. The average value of inheritances received among all households did increase but at a slow pace, by 10 %; the time trend is not statistically significant. Wealth transfers as a proportion of current net worth fell sharply over this period, from 29 to 19 %, though the time trend once again is not statistically significant. We also found that inheritances and other wealth transfers tend to be equalizing in terms of the distribution of household wealth, though a number of caveats apply to this result.     

Wealth as Security: Growth Curve Analyses of Household Income and Net Worth During a Recession

Building on evidence of increasing inequality with the 2008–2009 recession, we asked whether households experienced different financial trajectories through the recession depending on initial income and net worth. Using growth curve models of households headed by young adults in the Panel Study of Income Dynamics, we compared the relationship between initial income and net worth and the rate of change of income and net worth from 1989 to 2011 among households with income above and below $50,000. We found different patterns of income change and different relationships among income, net worth, and their rates of change between high- and low-income categories. Results suggest initial wealth helped to stabilize income and wealth changes among higher income households, reducing financial insecurity.     

The Differing Values of Multigeneration and First‐Generation Farmers: Their Influence on the Structure of Agriculture at the Rural‐Urban Interface

Recognizing the inherent pressures on farm families and farmland, USDA has been developing policies and programs that simultaneously attempt to retain existing farm families on the landscape, recruit new farmers, and create lasting economic opportunities rooted in agriculture. In this article we argue that to date there has been an overemphasis on economic and structural approaches and a systematic discounting of the way individual farmer and farm household motivations can differ as they relate to the farm household life cycle, enterprise growth, adaptation, and reproduction. We use a sociological lens to qualitatively and quantitatively examine the social differences between multigeneration and first‐generation farmers at the rural‐urban interface by exploring how economic and noneconomic values influence succession plans and enterprise structure. We find that the answers to these questions are complex, layered, and not static, as farm households cycle through the life course. We describe how the differences between young and old multigeneration and first‐generation farmers can influence the structure of agriculture at the rural‐urban interface, and conclude with some practical policy recommendations.     

THE EFFECT OF HOUSING WEALTH LOSSES ON SPENDING IN THE GREAT RECESSION

We use panel data on a complete inventory of household spending and assets to estimate the spending response to the sharp and largely unexpected declines in house values that occurred in the Great Recession. Our study complements the existing literature on this topic by relying exclusively on longitudinal micro data on both household wealth and expenditure. Our data span the period 2002–2012, allowing us to separate trends in spending from innovations in response to unexpected wealth changes. We find the marginal propensity to consume out of an unexpected housing wealth change to be 6 cents per dollar among older American households. (JEL D12, D14, E21)     

Off‐farm Work among Rural Households: A Case Study in the Brazilian Amazon

This article analyzes off‐farm work among subsistence‐level farmers in the Santarém region of the Brazilian Amazon. We build on the literature on rural livelihoods in the Global South by exploring how the opportunity to work off the farm is embedded in social relationships. We additionally differentiate our analysis by type of off‐farm work, and examine how other characteristics such as human capital, the available labor supply, and access to infrastructure vary by work outcome. In general, the factors that contribute to more secure, relatively higher‐paying work differ from those important in understanding patterns of lower‐paying, daily wage work. We find that on‐farm social capital, measured as the presence of a co‐resident on the property who works off the farm, increases an individual's probability of working off the farm, but has a stronger effect for lower‐wage work. We also find that the farm owner's relationship to households on the farm property plays a significant role in predicting patterns of off‐farm work. These findings suggest that social capital plays an important role in providing access to employment and therefore to cash income, but that farm‐level social capital does not necessarily provide pathways to stable or high‐paying jobs outside agriculture.     

Utilising a farm typology to identify potential adopters of alternative farming activities in Greek agriculture

Farm household survival strategies are acknowledged to determine the adoption of alternative farm enterprises as part of the farm household's production and reproduction pattern and are, thus, used to identify the potential adopters of such enterprises. The present work utilises an ideal typology of Greek farms in order to identify different types of farms as regards their mode of survival. Each survival strategy is linked to different motives for and constraints against the adoption of alternative farm enterprises. Results show that three types of farm households may be identified, namely subsistence, survivalist and productivist farm households. The potential adopters of alternative farm enterprises may be traced among farm households that pursue a survivalist mode of production. It is argued that the diversity of farm structures observed within this type of farm households cannot be regarded as the decisive factor as far as their mode of survival is concerned. Rather, it is considered to form a context of different motivations for and constraints against the adoption of alternative farming activities.     

Missing the wealthy in the HFCS: micro problems with macro implications

Wealth aggregates implied by the Household Finance and Consumption Survey (HFCS) usually yield much lower amounts than macroeconomic statistics reported in the National Accounts. An important source of this gap may be the under-representation of the wealthiest households in the HFCS. This article therefore combines a semi-parametric Pareto model estimated from top survey data and observations from rich lists with a non-parametric stratification approach to quantify the impact of the missing wealthy households on component-specific micro-macro gaps. We find that unadjusted micro data substantially underestimates wealth inequality. The largest effects are documented for equity. For other components, the missing wealthy explain less than ten percentage points of the micro-macro gap. We find that differences in oversampling strategies limit the cross-country comparability of unadjusted survey-implied wealth distributions and that our top tail adjustment leads to measures that are internationally better comparable.

     

Household Saving Behavior and the Influence of Family-Owned Business

This study focused on the lifecycle income objective of business-owning (farm and nonfarm) households. We hypothesized that the complex relationship between household and business management decisions had the potential to challenge predictions from standard household savings theory. Specifically, we tested for differences in saving behavior of these entrepreneurial households relative to the average US household. A limited dependent variable model was performed, keying in on the saving behavior and ability of household respondents in the Survey of Consumer Finances for 2007. The estimation results indicated that, along with standard demographic influences of savings models, households owning a farm or nonfarm business had a significantly higher likelihood of maintaining private saving in a given year. Our results highlight the necessity for future research on household saving behavior to account for the differing objectives and choice sets faced by households that own businesses when conducting analyses of household saving.     

Housing Valuation,Wealth Perception,and Homeowners’ Portfolio Composition

This study explores the link between wealth perception from an appreciation of the residential property price and homeowners’ preference toward asset categories pooled by risk. Household survey data for Portugal were used to build shares of low, medium, and high risk assets representing fractions of household’s total wealth. Data showed incomplete household portfolios along with housing capturing the largest share of households’ wealth, in line with the literature on composition puzzles. The findings indicate robust empirical evidence that the rate of housing valuation is an indicator of households’ wealth perception. When the housing price appreciates with respect to its initial cost, households suffer an endowment effect and tend to increase diversity in their portfolio, expanding the holdings of safe deposits as they raise the share of high risk assets.     

Does International Migration Affect Labor Supply,Non‐farm Diversification and Welfare of Households? Evidence from Egypt

This study examines the effect of international migration in Egypt using fixed‐effect regressions and panel data from Egypt Labour Market Panel Surveys in 2006 and 2012. We find that men and people with higher education are more likely to migrate than women and people with lower education. Middle‐aged people are also more likely to migrate than young or old people. International migration does not seem to affect the overall employment of remaining members of migrant‐sending households. However, it tends to increase the self‐employed work of members of migrant‐sending households. Finally, international migration also helps migrant‐sending households increase their wealth index. Remittances are used to improve living conditions (housing) and purchase more assets and durables. This finding supports the theory as well as the policy to increase migration as a way to stabilize consumption and reduce poverty in low income countries.     

Even the ‘Rich’ are Vulnerable: Multiple Shocks and Downward Mobility in Rural Uganda

Poverty data rarely capture processes of change, limiting our ability to understand poverty trajectories at the individual or household levels. This article uses a household survey, village‐level participatory studies and indepth life‐history interviews to examine people's poverty trajectories and to identify what drives and maintains chronic poverty. Composite shocks can propel previously non‐poor households into severe and long‐term poverty. Poverty is hard to escape, and people born into chronically poor households find few opportunities for accumulation and wealth creation. The analysis highlights the importance of poverty interrupters, including the end of conflict and the re‐integration of internally displaced people, and suggests that state‐led interventions would be needed to provide real opportunities to the chronically poor.     

Households’ Net Worth Accumulation Patterns and Young Adults’ Financial Health: Ripple Effects of the Great Recession?

We examined households’ dynamic patterns of net worth accumulation between 1999 and 2009 and asked whether these patterns related to the financial health of young adults growing up in those households. Two patterns of net worth emerged—the first remained high and stable and the second experienced a precipitous decline between 2007 and 2009. Young adults who grew up in households with high and stable net worth also experienced the greatest benefit in financial health. Given wealth losses in the wake of the Great Recession and the ripple effects those losses may have had—and may continue to have—on households and their children, policies that stimulate wealth accumulation may be feasible and timely strategies for improving financial health.