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lisbanner The Luxembourg Wealth Study (LWS) Database – Introduction and Selected Demonstrations Markus Jäntti 1,2 1 Swedish Institute for Social Research, Stockholm University 2 Luxembourg Income Study Seventh Winter School on Inequality and Social Welfare Theory January 10, 2012 Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 1 / 54
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The Luxembourg Wealth Study (LWS) Database –Introduction and Selected Demonstrations

Markus Jäntti1,2

1Swedish Institute for Social Research, Stockholm University 2Luxembourg Income Study

Seventh Winter School on Inequality and Social Welfare TheoryJanuary 10, 2012

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 1 / 54

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Introduction

Introduction

other economic resources than income important for well-being(consumption, wealth)little information on wealth on a comparable basis across countriesnational datasets have existed for some while, prominent ones(US Survey of Consumer Finances) have served as examples forother countriesthe ECB is running Household Finance and Consumption Network(HFCN) within the Euro systemno comparable definitions of wealth and debt across countries inpublicly available microdata

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 3 / 54

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Introduction

LWS Principles

Built up within the Luxembourg Income Study (LIS) – http://www.lisdatacenter.org/our-data/lis-database/following the same model.Establish a network of experts of micro-data on household networth to share accumulated knowledge and best practicesConstruct a comparable database containing wealth variablesbased on existing datasets to enable cross-country comparisonson household net worth, portfolio composition and wealthdistribution (including liquid assets, debts and other holdings)Produce guidelines for data producers – similar to what has beendone for income distribution statistics through LIS with the finalReport of the Canberra Group→ OECD Working Group currentlyoccupied with producing guidelines

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 4 / 54

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Introduction

LWS countries and datasets

Austria Survey of Household Financial Wealth 2004Canada Survey of Financial Security 1999Cyprus Survey of Consumer Finances 2002Finland Household Wealth Survey 1994, 1998Germany Socio-Economic Panel Study 2001, 2006Italy Survey of Household Income and Wealth 2002, 2004Japan Keio Household Panel Survey 2003Luxembourg Socio-economic panel (PSELL) 2007Norway Income and Wealth Survey 2002Sweden Wealth Survey 2002United Kingdom British Household Panel Study 2000United States Panel Study of Income Dynamics 2000

Survey of Consumer Finances 2000-2006

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Introduction

Issues in LWS construction

Surveys differ:Purpose: some designed to collect wealth data (e.g. CA, IT,US-SCF), some supplemented with special modules (e.g. GE, LX,UK, US-PSID)Source: mostly sample surveys, but supplemented withadministrative data in Nordic countriesSampling frame: some over-sample the richUnit of analysis: generally household, but individual in GE andUK, family in US and CANumber of wealth items: from 7 in UK to 30+ in IT, NW, US-SCFPerfect comparability cannot be achievedDefine basic wealth concept

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Introduction

Ideal LWS variable structure

DemographicsIncome and consumption aggregatesWealth variables -(household-individual-family level)

I Non-financial assetsI Financial AssetsI Liabilities

Behavioral variablesI Bequest motivationI Inheritance expectationsI Motives for savingsI Inter vivos transfersI Risk attitudeI Income and health uncertainty/riskI Expectations (fertility; income support from the state)

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Introduction

LWS Wealth Variables: Financial assets

Deposit Accounts: Transaction, Savings and CDs DATotal Bonds: Savings and Other Bonds TBStocks STMutual Funds and other investment funds TMLife insurance LIOther investment./ financial assets(non-pen) OFAPension Assets PA

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Introduction

LWS Wealth Variables: Non-Financial assets

Principal residence PRInvestment real estate IRBusiness Equity BEVehicles VHDurables/Collectibles DR/ CLOther non-financial assets ONF

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Introduction

LWS Wealth Variables: Liabilities

Total Liabilities TDTotal Home secured debt HSD

Principal residence mortgage MGOther property mortgage OMGOther home secured debt OHSD

Vehicle loans VLTotal Installment debt (inc. credit card bal) ILEducational loans ELOther loans from financial institutions OLInformal debt ID

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Introduction

Wealth Summary Variables

Risky assets RA =TB+ST+TMTotal assets TA=sum of all assetsHome secured debt HSD=MG+OMG+OHSDNon-housing debt NHD=TD-HSDTotal financial assets TFA1=DA+ST+TB+TMTotal non-financial assets TNF1=PR+IR

TNF2=PR+IR+BATotal debt TD=HSD+VL+IL+EL+OL+IDNet worth NW1=TFA1+TNF1-TD

NW2=TFA1+TNF2-TDNW = (sum of all assets)-(sum of all debts)

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Introduction

Other Wealth Variables

Miscellaneous net worth: OWLInheritance received: INH1-INH3Year of inheritance: YRINH1-YRINH3Remaining inheritance: INH4Tenure: OWNType of dwelling: DWELLOwn business: BUSSpecial variables: IRnet, Vhnet, Flags

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Introduction

Access the LWS Database

the LWS documentation http://www.lisdatacenter.org/our-data/lws-database/

register to access the LWS datahttp://www.lisdatacenter.org/data-access/:

I web tabulatorI LISSY

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The distribution of wealth and income

Exploring the distribution of wealth and income

introducing Japanese data on wealth and on income (2003)compare with

I Canada 1999I Germany 2001I Sweden 2002I United Kingdom (UK) 2000I United States (US) 2000

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The distribution of wealth and income

Data definitions

focus now onI gross wealth (not net worth = gross wealth − debt)I gross income (not on disposable income = gross income − direct

taxes)

household is the sharing unitindividuals are the unit of analysisboth wealth and income have been equivalizedoutlying observations can be very influential: also study “shaved”data (inner 98 percent of the marginal distributions of both incomeand wealth)

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 16 / 54

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The distribution of wealth and income

Analysis

aspects of the distribution of wealth and its componentsdistributional comparisons (cumulative distribution functions)Lorenz, Generalized Lorenz and Absolute Lorenz orderings ofcountriesdescriptive quantile regressions (10th, 50th [median] and 90thpercentiles as functions of age, education of household head andhousehold structure)examine the (conditional) joint distribution of income and wealth

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The distribution of wealth and income

Sample sizes and outliers

Canada Germany Japan Sweden UK USPre-shaving 13520 10909 5139 14355 7102 6680Post-shaving 12477 8977 3475 11621 5012 5972Difference 1043 1932 1664 2734 2090 708

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The distribution of wealth and income

Pre-shave percentilesPercentiles

1 10 50 90 99IncomeCanada 1976 9835 28041 57891 115673Germany 2316 10313 28131 59898 121111Japan 3155 7302 19126 39438 54098Sweden 3884 13380 27369 47353 87731UK 1360 9261 23945 49401 94656US 2393 11426 37040 91285 311850

WealthCanada 262 4799 104975 381790 1190518Germany 0 0 66768 341477 1124364Japan 0 0 51843 239522 698841Sweden 0 0 44816 179093 503063UK 0 342 83779 271210 788358US 0 1701 82673 414240 1800467

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The distribution of wealth and income The distribution and composition of wealth

Proportion with positive wealth and debtAll and middle income classes

Proportion positive Net worth Fin. assets Non-fin. assets DebtCanada

all 95.2 95.5 100.0 80.6Middle Income 98.4 99.2 100.0 86.5

Germanyall 93.9 93.0 66.7 52.4Middle Income 94.0 95.2 69.9 57.1

Japanall 88.1 85.5 70.5 45.6Middle Income 89.3 87.7 72.7 49.6

Swedenall 76.9 94.2 77.0 88.2Middle Income 79.9 95.4 83.8 90.7

UKall 90.9 86.1 93.5 80.6Middle Income 94.1 91.9 97.3 87.3

USall 91.0 87.9 96.5 79.3Middle Income 93.4 94.9 98.1 86.9

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The distribution of wealth and income The distribution and composition of wealth

Mean wealth and debtAll and middle income classes

Average Net worth Fin. assets Non-fin. assets DebtCanada

all 98348 46272 72687 20611Middle Income 103142 47970 79027 23856

Germanyall 91280 24246 91726 24692Middle Income 93503 23628 96428 26553

Japanall 63309 20352 61598 18641Middle Income 58623 18657 60333 20368

Swedenall 37360 11909 49809 24358Middle Income 37279 11895 51829 26445

UKall 67261 12546 79579 24864Middle Income 64593 11972 79948 27327

USall 97215 41284 87344 31412Middle Income 94607 37358 91823 34573

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The distribution of wealth and income The distribution and composition of wealth

90th percentile of wealth and debtAll and middle income classes

90th perc Net worth Fin. assets Non-fin. assets DebtCanada

all 257023 129616 152862 54225Middle Income 240293 117387 144514 56324

Germanyall 231781 58737 230960 72376Middle Income 227169 55571 230960 71725

Japanall 184084 59187 159698 64379Middle Income 180305 65007 164397 76573

Swedenall 112293 31073 119059 55907Middle Income 106883 29476 113391 54751

UKall 214497 45645 207320 71051Middle Income 208350 52559 181327 75142

USall 260485 114501 203852 81496Middle Income 228686 99760 179364 77686

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The distribution of wealth and income The distribution and composition of wealth

Median wealth and debtAll and middle income classes

Median Net worth Fin. assets Non-fin. assets DebtCanada

all 51237 13994 54810 10215Middle Income 65006 21174 63491 17276

Germanyall 52698 12063 60929 1588Middle Income 63502 13835 79142 5466

Japanall 44270 9301 48079 117Middle Income 60834 13965 64266 13616

Swedenall 18115 3864 35346 17008Middle Income 21701 4470 41370 21874

UKall 46822 3560 70186 21698Middle Income 131004 28985 127584 50647

USall 33302 4549 55048 18123Middle Income 45315 7325 70919 27578

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The distribution of wealth and income The distribution and composition of wealth

Gini coefficients wealth and debtAll and middle income classes

Gini coefficient Net worth Fin. assets Non-fin. assets DebtCanada

all 61.4 71.5 52.4 62.7Middle Income 52.2 62.9 42.7 55.3

Germanyall 62.4 62.7 63.0 77.1Middle Income 57.8 57.3 58.6 73.2

Japanall 71.1 67.6 58.6 79.2Middle Income 68.9 65.2 55.9 75.5

Swedenall 77.7 70.9 56.0 55.2Middle Income 73.0 68.5 48.1 48.8

UKall 62.4 78.5 50.2 60.3Middle Income 57.2 75.2 41.2 50.5

USall 71.8 81.1 59.6 62.5Middle Income 65.0 77.2 49.4 52.7

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The distribution of wealth and income The distribution and composition of wealth

Boxplots: example

Mean

0.50.050.125 0.25 0.375 0.625 0.75 0.8750.95Quantiles

Med

ian=Q

2

Q 1 Q 3

1/41/2

3/49/10

Fraction of Sample Covered

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 25 / 54

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The distribution of wealth and income The distribution and composition of wealth

Boxplot: LWS data

Wealth

Canada

Germany

Japan

Sweden

UK

US

0e+00 2e+05 4e+05 6e+05 8e+05

No

0e+00 2e+05 4e+05 6e+05 8e+05

Yes

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The distribution of wealth and income Distributional comparisons

Distributions compared for wealth: Canada vs US

0e+00 2e+05 4e+05 6e+05 8e+05 1e+06

0.0

0.2

0.4

0.6

0.8

1.0

wealth

Prop

ortio

n <=

x

n:26155245 m:0n:220223.923 m:0

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 27 / 54

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lisbanner

The distribution of wealth and income Distributional comparisons

Distributions compared for income: Canada vs US

0e+00 2e+05 4e+05 6e+05 8e+05 1e+06

0.0

0.2

0.4

0.6

0.8

1.0

wealth

Prop

ortio

n <=

x

n:26155245 m:0n:220223.923 m:0

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 28 / 54

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The distribution of wealth and income Distributional comparisons

Distributions compared for wealth: Japan vs US

0e+00 2e+05 4e+05 6e+05 8e+05 1e+06

0.0

0.2

0.4

0.6

0.8

1.0

wealth

Prop

ortio

n <=

x

n:13229 m:0n:220223.923 m:0

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 29 / 54

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lisbanner

The distribution of wealth and income Distributional comparisons

Distributions compared for income: Japan vs US

0e+00 2e+05 4e+05 6e+05 8e+05 1e+06

0.0

0.2

0.4

0.6

0.8

1.0

wealth

Prop

ortio

n <=

x

n:13229 m:0n:220223.923 m:0

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The distribution of wealth and income Distributional comparisons

Distributions compared for wealth: Germany vs Japan

0e+00 2e+05 4e+05 6e+05 8e+05 1e+06

0.0

0.2

0.4

0.6

0.8

1.0

wealth

Prop

ortio

n <=

x

n:12045115.474 m:0n:13229 m:0

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The distribution of wealth and income Distributional comparisons

Distributions compared for income: Germany vs Japan

0e+00 2e+05 4e+05 6e+05 8e+05 1e+06

0.0

0.2

0.4

0.6

0.8

1.0

wealth

Prop

ortio

n <=

x

n:12045115.474 m:0n:13229 m:0

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The distribution of wealth and income Distributional comparisons

Lorenz curves for wealth: within country

Population share

Lore

nz cu

rve

0.0

0.2

0.4

0.6

0.8

1.0

0.0 0.4 0.8

Canada

0.0 0.4 0.8

Germany

0.0 0.4 0.8

Japan

0.0 0.4 0.8

Sweden

0.0 0.4 0.8

UK

0.0 0.4 0.8

US

NoYes

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The distribution of wealth and income Distributional comparisons

Lorenz curves for wealth: country ordering

Population share

Lore

nz cu

rve

0.0

0.2

0.4

0.6

0.8

1.0

0.0 0.2 0.4 0.6 0.8 1.0

No

0.0 0.2 0.4 0.6 0.8 1.0

Yes

CanadaGermanyJapanSwedenUKUS

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The distribution of wealth and income Distributional comparisons

Lorenz curves for income: country ordering

Population share

Lore

nz cu

rve

0.0

0.2

0.4

0.6

0.8

1.0

0.0 0.2 0.4 0.6 0.8 1.0

No

0.0 0.2 0.4 0.6 0.8 1.0

Yes

CanadaGermanyJapanSwedenUKUS

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The distribution of wealth and income Distributional comparisons

Generalized Lorenz curves for wealth: countryordering

Population share

Lore

nz cu

rve

0

50000

100000

150000

0.0 0.2 0.4 0.6 0.8 1.0

No

0.0 0.2 0.4 0.6 0.8 1.0

Yes

CanadaGermanyJapanSwedenUKUS

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The distribution of wealth and income Distributional comparisons

Generalized Lorenz curves for income: countryordering

Population share

Lore

nz cu

rve

0

10000

20000

30000

40000

0.0 0.2 0.4 0.6 0.8 1.0

No

0.0 0.2 0.4 0.6 0.8 1.0

Yes

CanadaGermanyJapanSwedenUKUS

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The distribution of wealth and income Quantile regressions for wealth and gross income

Median regressions: Gross incomeCoefficient estimates and 95% CI

Coefficient estimates and 95% CI

Cova

riate

Age: 30−50

Age: 50−

Educ: High

Educ: Medium

Fam: cpl with kids

Fam: other

Fam: sng, no kids

Fam: sng parent

(Intercept)

−20000

Canada

−20000

Germany

−20000

Japan

−20000

Sweden

−20000

UK

−20000

US

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The distribution of wealth and income Quantile regressions for wealth and gross income

Median regressions: wealthCoefficient estimates and 95% CI

Coefficient estimates and 95% CI

Cova

riate

Age: 30−50

Age: 50−

Educ: High

Educ: Medium

Fam: cpl with kids

Fam: other

Fam: sng, no kids

Fam: sng parent

(Intercept)

−100000 150000

Canada

−100000 150000

Germany

−100000 150000

Japan

−100000 150000

Sweden

−100000 150000

UK

−100000 150000

US

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 39 / 54

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The joint distribution of wealth and gross income

Why study the joint distribution?

Informs us of the nature of the data.Wealth and income clearly related, but possibly in quite differentways.May reveal interesting differences that could be related toinstitutional and sectoral differences across countries.

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 41 / 54

Page 39: The Luxembourg Wealth Study (LWS) Database ...dse.univr.it/it/documents/it7/Jantti-lws-ho_slides.pdfIssues in LWS construction Surveys differ: Purpose: some designed to collect wealth

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The joint distribution of wealth and gross income

Income-wealth quartile groups

Proportion / Wealth across the top

Coun

try/ I

ncom

e do

wn th

e sid

e

CanadaGermany

JapanSweden

UKUS

: WealthQG 1 : IncomeQG 1

0.05 0.10 0.15

: WealthQG 2 : IncomeQG 1

: WealthQG 3 : IncomeQG 1

0.05 0.10 0.15

: WealthQG 4 : IncomeQG 1

CanadaGermany

JapanSweden

UKUS

: WealthQG 1 : IncomeQG 2

: WealthQG 2 : IncomeQG 2

: WealthQG 3 : IncomeQG 2

: WealthQG 4 : IncomeQG 2

CanadaGermany

JapanSweden

UKUS

: WealthQG 1 : IncomeQG 3

: WealthQG 2 : IncomeQG 3

: WealthQG 3 : IncomeQG 3

: WealthQG 4 : IncomeQG 3

CanadaGermany

JapanSweden

UKUS

0.05 0.10 0.15

: WealthQG 1 : IncomeQG 4

: WealthQG 2 : IncomeQG 4

0.05 0.10 0.15

: WealthQG 3 : IncomeQG 4

: WealthQG 4 : IncomeQG 4

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 42 / 54

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The joint distribution of wealth and gross income

Income-wealth quartile groups

Income−wealth cell

Prop

ortio

n

0.050.100.15

Canada

0.050.100.15

Germany

0.050.100.15

Japan

0.050.100.15

Sweden

0.050.100.15

UK

1−1 1−2 1−3 1−4 2−1 2−2 2−3 2−4 3−1 3−2 3−3 3−4 4−1 4−2 4−3 4−4

0.050.100.15

US

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 43 / 54

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The joint distribution of wealth and gross income

Regression results: share of variance explained

R2 in regression

Canada

Germany

Japan

Sweden

UK

US

0.10 0.15 0.20 0.25

DisposableIncome

0.10 0.15 0.20 0.25

Wealth

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 44 / 54

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The joint distribution of wealth and gross income

Regression results: wealthCoefficient estimates and confidence intervals

Coefficient estimates

Cova

riate

Age: 30−50

Age: 50−

Educ: High

Educ: Medium

Fam: cpl with kids

Fam: other

Fam: sng, no kids

Fam: sng parent

Intercept

−20000

Canada

−20000

Germany

−20000

Japan

−20000

Sweden

−20000

UK

−20000

US

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 45 / 54

Page 43: The Luxembourg Wealth Study (LWS) Database ...dse.univr.it/it/documents/it7/Jantti-lws-ho_slides.pdfIssues in LWS construction Surveys differ: Purpose: some designed to collect wealth

lisbanner

The joint distribution of wealth and gross income

Regression results: incomeCoefficient estimates and confidence intervals

Coefficient estimates

Cova

riate

Age: 30−50

Age: 50−

Educ: High

Educ: Medium

Fam: cpl with kids

Fam: other

Fam: sng, no kids

Fam: sng parent

Intercept

−1e+05 2e+05

Canada

−1e+05 2e+05

Germany

−1e+05 2e+05

Japan

−1e+05 2e+05

Sweden

−1e+05 2e+05

UK

−1e+05 2e+05

US

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 46 / 54

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The joint distribution of wealth and gross income

Residual standard deviation

Residual standard deviations of income and wealth

Coun

try

Canada

Germany

Japan

Sweden

UK

US

2e+04 4e+04 6e+04 8e+04

Income

2e+04 4e+04 6e+04 8e+04

Wealth

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 47 / 54

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The joint distribution of wealth and gross income

Residual correlation of gross income and wealth

Residual correlation of gross income and wealth

Coun

try

Canada

Germany

Japan

Sweden

UK

US

0.1 0.2 0.3 0.4

Markus Jäntti (SOFI/LIS) LIS/Wealth and income January 10, 2012 48 / 54


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