Wealth Inequality and Homeownership in Europe

Abstract

The recently published Household Finance and Consumption Survey has revealed large differences in wealth inequality between the countries of the Euro area.We find a strong negative correlation between wealth inequality and homeownership rates across countries.We use two decomposition methods to shed more light on this correlation.First, a Gini decomposition by homeownership status shows that the negative relationship is mostly driven by large between-group inequality across owners and renters.Second, to control for other observables, we conduct a detailed counterfactual decomposition of crosscountry inequality differences.We confirm the major role for homeownership rates in accounting for the wealth inequality differences.Our analysis suggests that the cross-country variation is mostly driven by differences in the savings behavior of households in the bottom half of the wealth distribution and that those differences in savings are to a large extent channeled through housing wealth.D31, E21, G11.