Pioneering Study Shows Richest Two Percent Own Half World Wealth
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Sat Dec 23 18:09:05 GMT 2006
*The full study can be downloaded here : *
*Pioneering Study Shows Richest Two Percent Own Half World Wealth
The richest 2% of adults in the world own more than half of global
household wealth according to a path-breaking study released today by
the Helsinki-based World Institute for Development Economics Research of
the United Nations University (UNU-WIDER).
The most comprehensive study of personal wealth ever undertaken also
reports that the richest 1% of adults alone owned 40% of global assets
in the year 2000, and that the richest 10% of adults accounted for 85%
of the world total. In contrast, the bottom half of the world adult
population owned barely 1% of global wealth.
The research finds that assets of $2,200 per adult placed a household in
the top half of the world wealth distribution in the year 2000. To be
among the richest 10% of adults in the world required $61,000 in assets,
and more than $500,000 was needed to belong to the richest 1%, a group
which --- with 37 million members worldwide --- is far from an exclusive
The UNU-WIDER study is the first of its kind to cover all countries in
the world and all major components of household wealth, including
financial assets and debts, land, buildings and other tangible property.
'One should be clear about what is meant by "wealth",' say co-authors
James Davies of the University of Western Ontario, Anthony Shorrocks and
Susanna Sandstrom of UNU-WIDER, and Edward Wolff of New York University.
'In everyday conversation the term "wealth" often signifies little more
than "money income". On other occasions economists use "wealth" to refer
to the value of all household resources, including human capabilities.'
'We use the term in its long-established sense of net worth: the value
of physical and financial assets less debts. In this respect, wealth
represents the ownership of capital. Although capital is only one part
of personal resources, it is widely believed to have a disproportionate
impact on household wellbeing and economic success, and more broadly on
economic development and growth.'
*Wealth levels across countries *
Using currency exchange rates, global household wealth amounted to $125
trillion in the year 2000, equivalent to roughly three times the value
of total global production (GDP) or to $20,500 per person. Adjusting for
differences in the cost-of-living across nations raises the value of
wealth to $26,000 per capita when measured in terms of purchasing power
parity dollars (PPP$).
The world map shows per capita wealth of different countries. *(Figure
1: World Wealth Levels in Year 2000
Average wealth amounted to $144,000 per person in the USA in year 2000,
and $181,000 in Japan. Lower down among countries with wealth data are
India, with per capita assets of $1,100, and Indonesia with $1,400 per
Per capita wealth levels vary widely across countries. Even within the
group of high-income OECD nations the range includes $37,000 for New
Zealand and $70,000 for Denmark and $127,000 for the UK.
Wealth is heavily concentrated in North America, Europe, and high income
Asia-Pacific countries. People in these countries collectively hold
almost 90% of total world wealth. *(Figure 2: Regional Wealth Shares
Although North America has only 6% of the world adult population, it
accounts for 34% of household wealth. Europe and high income
Asia-Pacific countries also own disproportionate amounts of wealth. In
contrast, the overall share of wealth owned by people in Africa, China,
India, and other lower income countries in Asia is considerably less
than their population share, sometimes by a factor of more than ten.
*(Figure 3: Population and Wealth Shares by Region
The study finds wealth to be more unequally distributed than income
across countries. High income countries tend to have a bigger share of
world wealth than of world GDP. The reverse is true of middle- and
low-income nations. However, there are exceptions to this rule, for
example the Nordic region and transition countries like the Czech
Republic and Poland.
The authors of the UNU-WIDER study explain that in Eastern European
countries 'private wealth is on the rise, but has still not reached very
high levels. Assets like private pensions and life insurance are held by
relatively few households. In the Nordic countries, the social security
system provides generous public pensions that may depress wealth
*World wealth inequality*
The concentration of wealth within countries varies significantly but is
generally high. The share of the top 10% ranges from around 40% in China
to 70% in the United States, and higher still in other countries.
The Gini value, which measures inequality on a scale from zero to one,
gives numbers in the range from 35% to 45% for income inequality in most
countries. In contrast, Gini values for wealth inequality are usually
between 65% and 75%, and sometimes exceed 80%.
Two high wealth economies, Japan and the United States, show very
different patterns of wealth inequality, with Japan having a wealth Gini
of 55% and the USA a wealth Gini of around 80%.
Wealth inequality for the world as a whole is higher still. The study
estimates that the global wealth Gini for adults is 89%. The same degree
of inequality would be obtained if one person in a group of ten takes
99% of the total pie and the other nine share the remaining 1%.
*Where do the world's wealthy live?*
According to the study, almost all of the world's richest individuals
live in North America, Europe, and rich Asia-Pacific countries. Each of
these groups of countries contribute about one third of the members of
the world's wealthiest 10%. *(Figure 4: Regional Composition of Global
China occupies much of the middle third of the global wealth
distribution, while India, Africa, and low-income Asian countries
dominate the bottom third.
For all developing regions of the world, the share of population exceeds
the share of global wealth, which in turn exceeds the share of members
of the wealthiest groups. *(Figure 3: Population and Wealth Shares by
A small number of countries account for most of the wealthiest 10% in
the world. One-quarter are Americans and another 20% are Japanese.
*(Figure 5: Percentage Membership of Wealthiest 10%
These two countries feature even more strongly among the richest 1% of
individuals in the world, with 37% residing in the USA and 27% in Japan.
*(Figure 6: Percentage Membership of Wealthiest 1%
According to Anthony Shorrocks, a country's representation in the rich
person's club depends on three factors: the size of the population,
average wealth, and wealth inequality.
'The USA and Japan stand out', he says, 'because they have large
populations and high average wealth. Although Switzerland and Luxembourg
have high average wealth, their populations are small. China on the
other hand fails to feature strongly among the super-rich because
average wealth is modest and wealth is evenly spread by international
standards. However, China is already likely to have more wealthy
residents than our data reveals for the year 2000, and membership of the
super-rich seems set to rise fast in the next decade.'
*Composition of household wealth *
The UNU-WIDER study shows major international differences in the
composition of assets, resulting from different influences on household
behaviour such as market structure, regulation, and cultural preferences.
Real property, particularly land and farm assets, are more important in
less developed countries.* (Figure 7: Asset Composition in Selected
This reflects not only the greater importance of agriculture, but also
immature financial institutions.
The study also reveals striking differences in the types of financial
assets owned. Savings accounts feature strongly in transition economies
and in some rich Asian countries, while share-holdings and other types
of financial assets are more evident in rich countries in the West.
*(Figure 8: Composition of Financial Wealth in Selected Countries
According to the authors of the UNU-WIDER study, savings accounts tend
to be favoured in Asian countries because 'there appears to be a strong
preference for liquidity and a lack of confidence in financial markets.
Other types of financial assets are more prominent in countries like the
UK and USA which have well developed financial sectors and which rely
heavily on private pensions.'
Surprisingly, household debt is relatively unimportant in poor
countries. As the authors of the study point out: 'While many poor
people in poor countries are in debt, their debts are relatively small
in total. This is mainly due to the absence of financial institutions
that allow households to incur large mortgage and consumer debts, as is
increasingly the situation in rich countries'
The authors go on to note that 'many people in high-income countries
have negative net worth and---somewhat paradoxically---are among the
poorest people in the world in terms of household wealth.'
*Authors of /The World Distribution of Household Wealth, /December 2006*
*James Davies <http://economics.uwo.ca/faculty/Davies/>* is a Professor,
and the RBC Financial Group Fellow, in the Department of Economics at
the University of Western Ontario. He is the Director of the UNU-WIDER
project on Personal Assets from a Global Perspective. jdavies at uwo.ca
<mailto:jdavies at uwo.ca>
is a Research Associate at UNU-WIDER. She has previously held positions
at the Luxemburg Income Study and Statistics Finland.
sandstrom at wider.unu.edu <mailto:sandstrom at wider.unu.edu>
*Anthony Shorrocks <http://www.wider.unu.edu/whoswho/shorrocks.htm>* is
the Director of WIDER and has previously held positions at the LSE and
University of Essex. shorrocks at wider.unu.edu
<mailto:shorrocks at wider.unu.edu>
*Edward Wolff <http://www.econ.nyu.edu/user/wolffe/>* is Professor of
Economics, New York University, Senior Scholar, Levy Economics Institute
of Bard College, and Research Associate, National Bureau of Economic
Research. edward.wolff at nyu.edu <mailto:edward.wolff at nyu.edu>
*(sorry for cross posting )
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