The role of assets and their distribution: OECD initiatives to provide

statistical guidance

Marco Mira d’Ercole, OECDe-Frame Conference, Paris 26 – 28 June 2012

Outline of presentation

Motivation: why is information on the distribution of household wealth important?

Where do we stand: data availability, information gaps, ex post harmonisation and their limits

Looking at the future: ex-ante harmonisation, work by OECD Expert Group on Micro Statistics on Household Income, Consumption and Wealth

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Motivation: why wealth matters conceptually?

Key factor shaping people’s consumption possibilities, i.e. economic well-being

Two keys recommendation of the Stiglitz et al. report:– Recommendation 2: Consider income and

consumption jointly with wealth (addresses availability of Balance Sheet aggregate data within SNA)

– Recommendation 3: Give more prominence to the distribution of income, consumption and wealth (addresses availability of household micro data)

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Motivation: analytic and policy issues (1)

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Monitoring the distribution of economic resources in each country: - wealth is much more unequally distributed than

income- changes in wealth inequality are not always in the

same direction as those for income inequality.

Monitoring the sustainability of economic growth: - SNA household balance sheets in the US did not

highlight major imbalances, i.e. increasing share of households facing risks of negative equity in the event of lower house prices; micro data are needed to address these issues

Motivation: analytic and policy issues (2)

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Monitoring household vulnerability (joint distribution matters)- Many household who are classified as non-poor based on

their household disposable income, have financial assets insufficient to cover three months of subsistence consumption

Understanding how household wealth is accumulated: - in Italy, the share of intergenerational transfers in household

wealth in 2002 was more than 50% (when accounting for interest earned on this wealth): implications for taxation, financing of old-age pensions and long-term care

Data availability (1)Many countries produce (or are in the process

of producing) micro statistics on household wealth (26 countries overall): huge difference relative to 1977

However, differences in concepts, sources, methods used to gather such information, e.g.– Coverage of wealth items (consumer durables, pension

accounts)– Coverage of households (e.g. NPISH, unincorporated business)– Valuation criteria used (market prices, historic costs) – Point in time when wealth is measured (end-of-year, current)– Whether assets are recorded ‘gross’ or ‘net’ of the liabilities

pertaining to them (e.g. net equity for housing wealth)– Unit of analysis for presenting statistics (e.g. households,

people, adults)

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Data availability (5)

Result of meta survey of country practices in 2010AUS AUT BEL CAN CHL DEU ESP EST FIN FRA GBR GRE ISR ITA JPN KOR LUX NLD NOR NZL POR SVK SVN USA

Financial assetsTransaction accountsSaving accountsCertificates of depositsBondsStocksFundsLife insurancePensions assetsOther financial assets

Non-financial assetsPrincipal residenceInvestment in real estateBusiness assetsVehiclesDurablesCollectiblesOther non-financial assets

LiabilitiesPrincipal residence mortgageOther property mortgageOthet home secured debtBusiness loansVehicles loansOther loansInformal debt

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- whether wealth items, even when covered, are reported separately or combined in some wider category.

Ex post harmonisation of existing data (1)

Some efforts to improve ex post comparability of country data on the distribution of household wealth:

Luxembourg Wealth Study: Contents harmonized in a common template, similar to that used for  LIS datasets: but– Limited country coverage (12 countries,  Australia,

Canada, Cyprus, Finland, Germany, Italy, Japan, Luxembourg, Norway, Sweden, United Kingdom, United States)

– Some wealth components available for one country but not for others (e.g. business equity). Implication: comparability comes at prices of incomplete picture of hh

wealth; weight of omitted wealth items varies significantly across

countries

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Data availability (3)Credit Suisse Global Wealth Database

– Roots in the work done for UN-WIDER – Combination of SNA balance sheets, household

wealth Survey and imputations, plus integration with “Rich Lists”

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The case for ex-ante harmonisation No international standards currently exist for micro

statistics on household wealth Demand for comprehensive statistics to understand

households conditions, i.e. joint distribution matters Integration with macro statistics

OECD Committee on Statistics is taking conceptual and statistical leadership role in field of hh economic resources through an Expert Group charged with:

Developing framework for integrating micro data on income, consumption and wealth (conceptual and practical challenges for combining and analysing information on each dimension)

Agreeing definitions and best practices for micro statistics on distribution of household wealth, including review of practices10

Preliminary recommendations (1)

Definition: “Wealth.. is value of all assets owned by a household less value of all liabilities at a given point in time”

Valuation: current value on the market, in principle Time of recording: same point in time for all

components and all assets, in principle Close alignment with 2008 SNA (with some exceptions

due to different analytical purpose. e.g. consumer durables)

Assets and liabilities recorded on a gross basis

Coverage: all resident private households

Household as the basic unit of analysis11

Preliminary recommendations (2)

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List of standard components of assets and liabilities

Timelines and next steps

Date Deliverable

1- 3 Aug 2o12 Address all remaining issues

Aug - Nov 2012 Editorial work to consolidate EG members’ contributions into two OECD publications

Dec 2012 – Feb 2013

Circulate drafts for CSTAT Delegates’ comments by end Jan 2013

Spring 2013 Release of two OECD publications

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For further information

• Marco Mira d’Ercole (marco.mira@oecd.org)

• Bindi Kindermann (bindi.kindermann@abs.gov.au )

• Nicolas Ruiz (nicolas.ruiz@oecd.org)

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